Fidelity & Guaranty Life (Form: 10-Q, Received: 02/07/2014 12:09:08)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2013



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-36227

FIDELITY & GUARANTY LIFE

(Exact name of registrant as specified in its charter)



Delaware	46-3489149
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1001 Fleet Street, 6th Floor Baltimore, MD	21202
(Address of principal executive offices)	(Zip Code)

(410) 895-0100

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x or No ¨ .

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x or No ¨ .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.



Large Accelerated Filer	¨		Accelerated Filer	¨
Non-accelerated Filer	x	(Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ or No x

There were 58,442,116 shares of the registrant’s common stock outstanding as of February 4, 2014 .

FIDELITY & GUARANTY LIFE AND SUBSIDIARIES

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	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:	3
Condensed Consolidated Balance Sheets as of December 31, 2013 and September 30, 201 3	3
Condensed Consolidated Statements of Operations for the three months ended December 31, 2013 and 2012	4
Condensed Consolidated Statements of Comprehensive Income for the three months ended December 31, 2013 and 2012	5
Condensed Consolidated Statements of Changes in Shareholder's Equity for the three months ended December 31, 2013 and the year ended September 30, 2013	6
Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 2013 and 2012	7
Notes to Condensed Consolidated Financial Statements	8
(1) Basis of Presentation and Nature of Business	8
(2) Significant Accounting Policies and Practices	8
(3) Significant Risks and Uncertainties	9
(4) Investments	10
(5) Derivative Financial Instruments	16
(6) Fair Value of Financial Instruments	18
(7) Intangible Assets	25
(8) Long Term Debt	26
(9) Equity	26
(10) Stock Compensation	26
(11) Income Taxes	30
(12) Commitments and Contingencies	30
(13) Reinsurance	31
(14) Related Party Transactions	31
(15) Earnings Per Share	34
(16) Insurance Subsidiary Financial Information and Regulatory Matters	34
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3. Quantitative and Qualitative Disclosures about Market Risk	54
Item 4. Controls and Procedures	59

PART II. OTHER INFORMATION
Item 1. Legal Proceedings	62
Item 1A. Risk Factors	62
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 3. Defaults Upon Senior Securities	62
Item 4. Mine Safety Disclosures	62
Item 5. Other Information	63
Item 6. Exhibits	64

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PART I: FINANCIAL INFORMATION


Item 1.	Financial Statements

FIDELITY & GUARANTY LIFE AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)



	December 31, 2013		September 30, 2013
	(Unaudited)
ASSETS
Investments:
Fixed maturities securities, available-for-sale, at fair value	$	16,327,617	$	15,541,526
Equity securities, available-for-sale, at fair value	286,922		271,075
Derivative investments	294,531		221,758
Other invested assets	316,552		188,180
Total investments	17,225,622		16,222,539
Related party loans and investments	96,442		119,044
Cash and cash equivalents	759,471		1,204,334
Accrued investment income	157,785		159,287
Reinsurance recoverable	3,723,693		3,728,632
Intangibles, net	601,444		563,758
Deferred tax assets	225,908		226,351
Other assets	155,292		205,230
Total assets	$	22,945,657	$	22,429,175

LIABILITIES AND SHAREHOLDER'S EQUITY

Contractholder funds	$	15,519,722	$	15,248,216
Future policy benefits	3,545,881		3,556,808
Funds withheld for reinsurance liabilities	1,381,238		1,407,713
Liability for policy and contract claims	60,331		51,456
Long-term debt	300,000		300,000
Other liabilities	806,662		700,097
Total liabilities	21,613,834		21,264,290


Shareholder's equity:
Common stock ($.01 par value, 500,000,000 shares authorized, 58,270,822 issued and outstanding at December 31, 2013; 47,000,000 shares issued and outstanding at September 30, 2013)	583		—
Additional paid-in capital	700,528		527,124
Retained earnings	524,572		524,871
Accumulated other comprehensive income	106,140		112,890
Total shareholder's equity	1,331,823		1,164,885
Total liabilities and shareholder's equity	$	22,945,657	$	22,429,175

See accompanying notes to condensed consolidated financial statements.

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FIDELITY & GUARANTY LIFE AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share data)



	Three months ended
	December 31, 2013			December 31, 2012
	(Unaudited)
Revenues:
Premiums	$	13,705		$	13,796
Net investment income	183,437			170,298
Net investment gains	123,417			146,475
Insurance and investment product fees and other	15,552			13,729
Total revenues	336,111			344,298
Benefits and expenses:
Benefits and other changes in policy reserves	216,856			83,644
Acquisition and operating expenses, net of deferrals	26,004			26,914
Amortization of intangibles	22,892			69,511
Total benefits and expenses	265,752			180,069
Operating income	70,359			164,229
Interest expense	(5,624		)	(34		)
Other income	—			225
Income before income taxes	64,735			164,420
Income tax expense	22,041			53,815
Net income	$	42,694		$	110,605

Net income per common share:

Basic	$	0.87		$	2.35
Diluted	$	0.87		$	2.35
Weighted average common shares used in computing net income per common share:
Basic	49,142,208			47,000,000
Diluted	49,263,675			47,000,000

Supplemental disclosures:
Total other-than-temporary impairments	$	(34	)	$	(509	)
Less non-credit portion of other-than-temporary impairments included in other comprehensive income	—			—
Net other-than-temporary impairments	(34		)	(509		)
Gains (losses) on derivative instruments	111,538			(25,568		)
Other realized investment gains	11,913			172,552
Total net investment gains	$	123,417		$	146,475

See accompanying notes to condensed consolidated financial statements.

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FIDELITY & GUARANTY LIFE AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)



	Three months ended
	December 31, 2013			December 31, 2012
	(Unaudited)
Net income	$	42,694		$	110,605

Other comprehensive income
Unrealized investment (losses) gains:
Changes in unrealized investment (losses) gains before reclassification adjustment	(10,275		)	126,252
Net reclassification adjustment for (gains) included in net investment gains	(8,134		)	(172,043		)
Changes in unrealized investment (losses) after reclassification adjustment	(18,409		)	(45,791		)
Adjustments to intangible assets	8,026			27,961
Changes in deferred income tax asset/liability	3,633			6,241
Net change to derive comprehensive income (loss) for the period	(6,750		)	(11,589		)

Comprehensive income, net of tax	$	35,944		$	99,016

See accompanying notes to condensed consolidated financial statements.

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FIDELITY & GUARANTY LIFE AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY

(In thousands)



(in thousands)	Common Stock		Additional Paid-in Capital/Contributed Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholder’s Equity

Balance, September 30, 2012	$	—	$	415,576		$	440,723		$	434,482		$	1,290,781
Capital contributions from Harbinger Group Inc.	—		111,711			—			—			111,711
Dividends	—		—			(93,654		)	—			(93,654		)
Distributions to Harbinger Group Inc. and subsidiaries	—		—			(169,859		)	—			(169,859		)
Net income	—		—			347,661			—			347,661
Unrealized investment losses, net	—		—			—			(321,592		)	(321,592		)
Stock compensation	—		(163		)	—			—			(163		)
Balance, September 30, 2013	$	—	$	527,124		$	524,871		$	112,890		$	1,164,885
Dividends	—		—			(42,993		)	—			(42,993		)
Issuance of common stock	583		(583		)	—			—			—
Proceeds from issuance of common stock, net of transaction fees	—		172,996			—			—			172,996
Net income	—		—			42,694			—			42,694
Unrealized investment losses, net	—		—			—			(6,750		)	(6,750		)
Stock compensation	—		991			—			—			991
Balance, December 31, 2013	$	583	$	700,528		$	524,572		$	106,140		$	1,331,823

See accompanying notes to condensed consolidated financial statements.

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FIDELITY & GUARANTY LIFE AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



	Three months ended
	December 31, 2013			December 31, 2012
	(Unaudited)
Cash flows from operating activities:
Net income	$	42,694		$	110,605
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of properties	1,102			908
Amortization of intangibles	22,892			69,511
Stock-based compensation	7,139			897
Amortization of debt issuance costs	843			—
Deferred income taxes	4,079			122,033
Interest credited/index credits and other changes to contractholder account balances	178,298			55,936
Amortization of fixed maturity discounts and premiums	(14,845		)	13,235
Net recognized (gains) on investments and derivatives	(123,417		)	(146,475		)
Charges assessed to contractholders for mortality and administration	(9,577		)	(6,778		)
Deferred policy acquisition costs	(52,550		)	(35,698		)
Changes in operating assets and liabilities:
Accrued investment income	1,502			38,573
Reinsurance recoverable	(17,748		)	(21,936		)
Future policy benefits	(10,927		)	(22,518		)
Funds withheld from reinsurers	(39,924		)	(672		)
Collateral (returned) posted	2,739			—
Liability for policy and contract claims	8,875			8,574
Other operating	36,868			(113,986		)
Net cash provided by operating activities	38,043			72,209
Cash flows from investing activities:
Proceeds from investments sold, matured or repaid:
Fixed maturities	1,663,700			2,913,381
Equity securities	42,249			21
Derivatives instruments and other invested assets	102,702			49,495
Cost of investments acquired:
Fixed maturities	(2,535,337		)	(3,379,147		)
Equity securities	(63,154		)	(15,965		)
Derivatives instruments and other invested assets	(167,943		)	(45,335		)
Related party loans and investments	22,602			(35,666		)
Capital expenditures	(2,960		)	(1,348		)
Net cash (used in) investing activities	(938,141		)	(514,564		)
Cash flows from financing activities:
Capital funding	—			(1,184		)
Proceeds from issuance of common stock, net of transaction fees	175,854			—
Dividends paid	(42,993		)	(20,000		)
Contractholder account deposits	772,257			491,480
Contractholder account withdrawals	(449,883		)	(475,558		)
Net cash provided by (used in) financing activities	455,235			(5,262		)
Change in cash & cash equivalents	(444,863		)	(447,617		)
Cash and cash equivalents at beginning of period	1,204,334			1,054,589
Cash and cash equivalents at end of period	$	759,471		$	606,972

Supplemental disclosures of cash flow information:
Interest paid	$	9,775		$	—
Income taxes paid	$	—		$	1,683

See accompanying notes to condensed consolidated financial statements.

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FIDELITY & GUARANTY LIFE AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in thousands, except share and per share figures)

(1) Basis of Presentation and Nature of Business

Fidelity & Guaranty Life (formerly, Harbinger F&G, LLC (“HFG”)) (“FGL” and, collectively with its subsidiaries, the “Company”) is a direct, subsidiary of Harbinger Group Inc. (“HGI”). HGI is a diversified holding company focused on obtaining controlling equity stakes in companies that operate across a diversified set of industries. FGL and HGI’s shares of common stock trade on the New York Stock Exchange (“NYSE”) under the symbols “FGL” and “HRG,” respectively. Subsequent to the Company's initial public offering in December 2013, HGI held 47,000,000 shares of FGL's outstanding common stock, representing an 80.7% intere st. In January of 2014, HGI transferred HGI’s ownership interest in FGL common shares to FS Holdco, Ltd, which is a direct wholly-owned subsidiary of HGI.

FGL’s primary business is the sale of individual life insurance products and annuities through independent agents, managing general agents, and specialty brokerage firms and in selected institutional markets. FGL’s principal products are deferred annuities (including fixed indexed annuity (“FIA”) contracts), immediate annuities and life insurance products. FGL markets products through its wholly-owned insurance subsidiaries, Fidelity & Guaranty Life Insurance Company (“FGL Insurance”) and Fidelity & Guaranty Life Insurance Company of New York (“FGL NY Insurance”), which together are licensed in all fifty states and the District of Columbia.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of the Company included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of such information. All such adjustments are of a normal recurring nature. Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures, including a description of significant accounting policies normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), have been condensed or omitted pursuant to such rules and regulations. These interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Registration Statement on Form S-1/A filed with the SEC on December 3, 2013 (the “Form S-1”). The results of operations for the three months ended December 31, 2013 are not necessarily indicative of the results for any subsequent periods or the entire fiscal year ending September 30, 2014.

The Company’s fiscal quarters end on the last calendar day of the months of December, March, June and September.

Dollar amounts in the accompanying footnotes are presented in thousands, unless otherwise noted.

(2) Significant Accounting Policies and Practices

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of FGL and all other entities in which FGL has a controlling financial interest (none of which are variable interest entities). All intercompany accounts and transactions have been eliminated in consolidation.

Recent Accounting Pronouncements

Offsetting Assets and Liabilities

In December 2011, the Financial Accounting Standards Board (“FASB”) issued amended disclosure requirements for offsetting financial assets and financial liabilities to allow investors to better compare financial statements prepared under US GAAP with financial statements prepared under International Financial Reporting Standards. The new standards are effective for the Company beginning in the first quarter of its fiscal year ending September 30, 2014. ASU 2011-11 Disclosures about Offsetting Assets and Liabilities - was adopted by the

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Company effective October 1, 2013. FGL does not offset any of its derivative transactions, including bifurcated embedded derivatives, in its statement of financial position. The Company only enters into purchased equity options and long futures contracts. The Company has not entered into any repurchase and reverse repurchase agreements or securities borrowing and lending transactions. Accordingly, no additional disclosures are required.

Investments in Qualified Affordable Housing Projects

In January 2014, the FASB issued amended guidance which allows investors in Low Income Housing Tax Credit (“LIHTC”) programs that meet specified conditions to present the net tax benefits (net of the amortization of the cost of the investment) within income tax expense. The cost of the investments that meet the specified conditions will be amortized in proportion to (and over the same period as) the total expected tax benefits, including the tax credits and other tax benefits, as they are realized on the tax return. The guidance is required to be applied retrospectively, if investors elect the proportional amortization method. However, if investors have existing LIHTC investments accounted for under the effective-yield method at adoption, they may continue to apply that method for those existing investments. The new standards will become effective for the Company beginning in the first quarter of its fiscal year ending September 30, 2016. The Company is currently evaluating the impact of this new accounting guidance on its consolidated financial position and results of operations.

(3) Significant Risks and Uncertainties

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Due to the inherent uncertainty involved in making estimates, actual results in future periods could differ from those estimates.

The Company’s significant estimates which are susceptible to change in the near term relate to (1) recognition of deferred tax assets and related valuation allowances, (2) fair value of certain invested assets and derivatives including embedded derivatives (see Notes 4 and 5), (3) Other than temporary impairment “OTTI”of available-for-sale investments (see Note 4), (4) amortization of intangibles (see Note 7), (5) estimates of reserves for loss contingencies, including litigation and regulatory reserves (see Note 12) and (6) reserves for future policy benefits and product guarantees.

Concentrations of Financial Instruments

As of December 31, 2013 and September 30, 2013 , the Company’s most significant investment in one industry, excluding U.S. Government securities, was its investment securities in the banking industry with a fair value of $ 1,973,981 , or 11.5% and $ 1,892,103 or 11.7% , respectively, of the invested assets portfolio. The Company’s holdings in this industry include investments in 82 different issuers with the top ten investments accounting for 37.8% of the total holdings in this industry. As of December 31, 2013 and September 30, 2013 , the Company had investments in 3 and 6 issuers that exceeded 10% of stockholders equity with a fair value of $ 410,924 and $ 788,696 , or 2.4% and 4.9% of the invested assets portfolio, respectively. Additionally, the Company’s largest concentration in any single issuer as of December 31, 2013 and September 30, 2013 , had a fair value of $ 140,532 and $ 150,716 or 0.8% and 0.9% of the invested assets portfolio, respectively.

Concentrations of Financial and Capital Markets Risk

The Company is exposed to financial and capital markets risk, including changes in interest rates and credit spreads which can have an adverse effect on the Company’s results of operations, financial condition and liquidity. The Company expects to continue to face challenges and uncertainties that could adversely affect its results of operations and financial condition.

The Company’s exposure to interest rate risk relates primarily to the market price and cash flow variability associated with changes in interest rates. A rise in interest rates, in the absence of other countervailing changes, will decrease the net unrealized gain position of the Company’s investment portfolio and, if long-term interest

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rates rise dramatically within a six to twelve month time period, certain of the Company’s products may be exposed to disintermediation risk. Disintermediation risk refers to the risk that policyholders may surrender their contracts in a rising interest rate environment, requiring the Company to liquidate assets in an unrealized loss position. This risk is mitigated to some extent by the high level of surrender charge protection provided by the Company’s products.

Concentration of Reinsurance Risk

The Company has a significant concentration of reinsurance with Wilton Reassurance Company (“Wilton Re”) and Front Street RE (Cayman) Ltd. (“FSRCI”), an affiliate that could have a material impact on the Company’s financial position in the event that Wilton Re and FSRCI fail to perform their obligations under the various reinsurance treaties. As of December 31, 2013 , the net amount recoverable from Wilton Re was $1,350,092 and the net amount recoverable from FSRCI is $ 1,341,497 . The Company monitors both the financial condition of individual reinsurers and risk concentration arising from similar geographic regions, activities and economic characteristics of reinsurers to reduce the risk of default by such reinsurers.

(4) Investments

The Company’s debt and equity securities have been designated as available-for-sale and are carried at fair value with unrealized gains and losses included in accumulated other comprehensive income (“AOCI”) net of associated adjustments for value of business acquired (“VOBA”), deferred acquisition costs (“DAC”) and deferred income taxes. The Company’s consolidated investments at December 31, 2013 and September 30, 2013 are summarized as follows:



	December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Carrying Value

Available-for sale securities
Asset-backed securities	$	1,830,206	$	20,737	$	(8,165	)	$	1,842,778	$	1,842,778
Commercial mortgage-backed securities	422,575		25,236		(3,182		)	444,629		444,629
Corporates	9,963,806		272,090		(189,278		)	10,046,618		10,046,618
Equities	293,940		6,810		(13,828		)	286,922		286,922
Hybrids	400,547		20,755		(3,228		)	418,074		418,074
Municipals	1,121,207		45,199		(44,980		)	1,121,426		1,121,426
Agency residential mortgage-backed securities	88,948		2,192		(91		)	91,049		91,049
Non-agency residential mortgage-backed securities	1,564,094		99,209		(11,276		)	1,652,027		1,652,027
U.S. Government	711,453		5,796		(6,233		)	711,016		711,016
Total available-for-sale securities	16,396,776		498,024		(280,261		)	16,614,539		16,614,539
Derivative investments	148,310		147,034		(813		)	294,531		294,531
Other invested assets	316,552		—		—			316,552		316,552
Total investments	$	16,861,638	$	645,058	$	(281,074	)	$	17,225,622	$	17,225,622

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	September 30, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Carrying Value

Available-for-sale securities
Asset-backed securities	$	1,745,241	$	24,529	$	(5,176	)	$	1,764,594	$	1,764,594
Commercial mortgage-backed securities	431,265		24,660		(1,596		)	454,329		454,329
Corporates	9,314,661		288,702		(185,054		)	9,418,309		9,418,309
Equities	274,647		6,683		(10,255		)	271,075		271,075
Hybrids	412,640		19,481		(3,304		)	428,817		428,817
Municipals	998,832		49,013		(40,835		)	1,007,010		1,007,010
Agency residential mortgage-backed securities	96,452		2,397		(252		)	98,597		98,597
Non-agency residential mortgage-backed securities	1,304,007		77,410		(13,394		)	1,368,023		1,368,023
U.S. Government	998,530		7,174		(3,857		)	1,001,847		1,001,847
Total available-for-sale securities	15,576,275		500,049		(263,723		)	15,812,601		15,812,601
Derivatives Instruments	141,664		88,461		(8,367		)	221,758		221,758
Other invested assets	188,180		—		—			188,180		188,180
Total investments	$	15,906,119	$	588,510	$	(272,090	)	$	16,222,539	$	16,222,539

Included in AOCI were cumulative unrealized gains of $851 and unrealized losses of $1,880 related to the non-credit portion of OTTI on non-agency residential mortgage-backed securities ("RMBS") at December 31, 2013 and September 30, 2013 . The non-agency RMBS unrealized gains and losses represent the difference between book value and fair value on securities that were previously impaired. There have been no impairments or write downs on any of the 2013 purchased non-agency RMBS.

Securities held on deposit with various state regulatory authorities had a fair value of $13,727,760 and $ 19,350 at December 31, 2013 and September 30, 2013 , respectively. The increase in securities held on deposits is due to the FGL Insurance's re-domestication from Maryland to Iowa. Under Iowa regulations, insurance companies are required to hold securities on deposit in an amount no less than the company's legal reserve as prescribed by Iowa regulations.

In accordance with the Company's Federal Home Loan Bank of Atlanta (“FHLB”) agreements, the investments supporting the funding agreement liabilities are pledged as collateral to secure the FHLB funding agreement liabilities. The collateral investments had a fair value of $ 591,783 and $ 604,899 at December 31, 2013 and September 30, 2013 , respectively.

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The amortized cost and fair value of fixed maturity available-for-sale securities by contractual maturities, as applicable, are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or pre-pay obligations.



	December 31, 2013
	Amortized Cost		Fair Value
Corporates, Non-structured Hybrids, Municipal and U.S. Government securities:
Due in one year or less	$	345,545	$	348,092
Due after one year through five years	3,059,155		3,133,238
Due after five years through ten years	3,315,121		3,332,054
Due after ten years	5,444,439		5,448,255
Subtotal	12,164,260		12,261,639
Other securities which provide for periodic payments:
Asset-backed securities	1,830,206		1,842,778
Commercial-mortgage-backed securities	422,575		444,629
Structured hybrids	32,753		35,495
Agency residential mortgage-backed securities	88,948		91,049
Non-agency residential mortgage-backed securities	1,564,094		1,652,027
Total fixed maturity available-for-sale securities	$	16,102,836	$	16,327,617

The Company's available-for-sale securities with unrealized losses are reviewed for potential OTTI. In evaluating whether a decline in value is other-than-temporary, the Company considers several factors including, but not limited to the following: (1) the extent and the duration of the decline; (2) the reasons for the decline in value (credit event, currency or interest-rate related, including general credit spread widening); and (3) the financial condition of and near-term prospects of the issuer. The Company also considers the ability and intent to hold the investment for a period of time to allow for a recovery of value.

The Company analyzes its ability to recover the amortized cost by comparing the net present value of cash flows expected to be collected with the amortized cost of the security. For mortgage-backed and asset-backed securities, cash flow estimates consider the payment terms of the underlying assets backing a particular security, including interest rate and prepayment assumptions, based on data from widely accepted third-party data sources or internal estimates. In addition to interest rate and prepayment assumptions, cash flow estimates also include other assumptions regarding the underlying collateral including default rates and recoveries, which vary based on the asset type and geographic location, as well as the vintage year of the security. For structured securities, the payment priority within the tranche structure is also considered. For all other debt securities, cash flow estimates are driven by assumptions regarding probability of default and estimates regarding timing and amount of recoveries associated with a default. If the net present value is less than the amortized cost of the investment, an OTTI impairment is recognized. FGL has concluded that the fair values of the securities presented in the table below were not OTTI as of December 31, 2013 .

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The fair value and gross unrealized losses of available-for-sale securities, aggregated by investment category, were as follows:



	December 31, 2013
	Less than 12 months					12 months or longer					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Available-for-sale securities
Asset-backed securities	$	496,893	$	(6,931	)	$	127,497	$	(1,234	)	$	624,390	$	(8,165	)
Commercial-mortgage-backed securities	29,419		(507		)	5,926		(2,675		)	35,345		(3,182		)
Corporates	3,355,410		(162,999		)	477,879		(26,279		)	3,833,289		(189,278		)
Equities	131,677		(13,772		)	6,909		(56		)	138,586		(13,828		)
Hybrids	106,254		(3,119		)	8,256		(109		)	114,510		(3,228		)
Municipals	478,220		(28,368		)	168,055		(16,612		)	646,275		(44,980		)
Agency residential mortgage-backed securities	11,871		(78		)	526		(13		)	12,397		(91		)
Non-agency residential mortgage-backed securities	354,502		(10,554		)	55,235		(722		)	409,737		(11,276		)
U.S. Government	337,957		(6,233		)	—		—			337,957		(6,233		)
Total available-for-sale securities	$	5,302,203	$	(232,561	)	$	850,283	$	(47,700	)	$	6,152,486	$	(280,261	)
Total number of available-for-sale securities in an unrealized loss position less than twelve months													634
Total number of available-for-sale securities in an unrealized loss position twelve months or longer													109
Total number of available-for-sale securities in an unrealized loss position													743

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	September 30, 2013
	Less than 12 months					12 months or longer					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Available-for-sale securities
Asset-backed securities	$	329,319	$	(4,496	)	$	81,483	$	(680	)	$	410,802	$	(5,176	)
Commercial-mortgage-backed securities	26,575		(525		)	4,860		(1,071		)	31,435		(1,596		)
Corporates	3,457,206		(174,989		)	185,956		(10,065		)	3,643,162		(185,054		)
Equities	118,609		(9,120		)	32,240		(1,135		)	150,849		(10,255		)
Hybrids	52,027		(3,304		)	—		—			52,027		(3,304		)
Municipals	333,278		(27,359		)	144,365		(13,476		)	477,643		(40,835		)
Agency residential mortgage-backed securities	9,791		(117		)	1,148		(135		)	10,939		(252		)
Non-agency residential mortgage-backed securities	325,170		(12,224		)	69,910		(1,170		)	395,080		(13,394		)
U.S government	753,899		(3,857		)	—		—			753,899		(3,857		)
Total available-for-sale securities	$	5,405,874	$	(235,991	)	$	519,962	$	(27,732	)	$	5,925,836	$	(263,723	)
Total number of available-for-sale securities in an unrealized loss position less than twelve months													588
Total number of available-for-sale securities in an unrealized loss position twelve months or longer													78
Total number of available-for-sale securities in an unrealized loss position													666

At December 31, 2013 and September 30, 2013 , securities in an unrealized loss position were primarily concentrated in investment grade corporate debt instruments and municipals. Total unrealized losses were $ 280,261 and $ 263,723 at December 31, 2013 and September 30, 2013 , respectively.

At December 31, 2013 and September 30, 2013 , securities with a fair value of $77,074 and $ 60,931 , respectively, were depressed greater than 20% of amortized cost (excluding U.S. Government and U.S. Government sponsored agency securities), which represented less than 1% of the carrying values of all investments.

The following table provides a reconciliation of the beginning and ending balances of the credit loss portion of OTTI on fixed maturity securities held by the Company for the three months ended December 31, 2013 , and December 31, 2012 , for which a portion of the OTTI was recognized in AOCI:



	Three months ended December 31,
	2013		2012
Beginning balance	$	2,681	$	2,681
Increases attributable to credit losses on securities:
Other-than-temporary impairment was previously recognized	—		—
Other-than-temporary impairment was not previously recognized	—		—
Ending balance	$	2,681	$	2,681

For the three months ended December 31, 2013 , the Company recognized impairment losses in operations totaling $34 , including credit impairments of $0 and change-of-intent impairments of $34 and had an amortized cost of $229 and a fair value of $195 at the time of impairment. For the three months ended December 31, 2012 , the Company recognized impairment losses in operations totaling $509 , including credit impairments of $ 155 , and change-of-intent impairments of $ 354 and had an amortized cost of $1,608 and a fair value of $1,099 at December 31, 2012 .

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Details underlying write-downs taken as a result of OTTI that were recognized in net income and included in net realized gains on securities were as follows:



	Three months ended December 31,
	2013		2012
OTTI recognized in net income:
Non-agency residential mortgage-backed securities	$	34	$	509
Total OTTI	$	34	$	509

The portion of OTTI recognized in AOCI is disclosed in the Statement of Comprehensive Income.

Net Investment Income

The major sources of “ Net investment income ” on the accompanying Condensed Consolidated Statements of Operations were as follows:



	Three months ended December 31,
	2013			2012
Fixed maturity available-for-sale securities	$	175,286		$	165,415
Equity available-for-sale securities	4,390			5,351
Related party loans	1,877			2,183
Policy loans	168			266
Invested cash and short-term investments	74			835
Other investments	5,194			346
Gross investment income	186,989			174,396
Investment expense	(3,552		)	(4,098		)
Net investment income	$	183,437		$	170,298

Net investment gains

Details underlying “ Net investment gains ” reported on the accompanying Condensed Consolidated Statements of Operations were as follows:



	Three months ended December 31,
	2013			2012
Net realized gains on fixed maturity available-for-sale securities	$	13,564		$	172,033
Realized (losses) on equity securities	(1,613		)	—
Net realized gains on securities	11,951			172,033
Realized gains on certain derivative instruments	54,880			15,717
Unrealized gains (losses) on certain derivative instruments	60,972			(41,285		)
Change in fair value of reinsurance related embedded derivative	(4,314		)	—
Realized gains (losses) on derivatives and reinsurance related embedded derivative	111,538			(25,568		)
Realized (losses) gains on other invested assets	(72		)	10
Net investment gains	$	123,417		$	146,475

For the three months ended December 31, 2013 , principal repayments, calls, tenders, and proceeds from the sale of fixed maturity available-for-sale securities totaled $ 1,663,700 , gross gains on such sales totaled $14,390 and gross losses totaled $826 , respectively.

For the three months ended December 31, 2012 , principal repayments, calls, tenders, and proceeds from the sale of fixed maturity available-for-sale securities, totaled $ 2,415,143 , gross gains on such sales totaled $ 177,972 and gross losses totaled $463 , respectively.

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(5) Derivative Financial Instruments

The carrying amounts (which equal fair value) of derivative instruments, including derivative instruments embedded in FIA contracts, is as follows:



	December 31, 2013		September 30, 2013
Assets:
Derivative investments:
Call options	$	294,094	$	221,758
Futures contracts	437		—
Other Assets:
Reinsurance related embedded derivative	113,710		118,025
	$	408,241	$	339,783



Liabilities:
Contractholder funds:
FIA embedded derivative	$	1,644,724	$	1,544,447
Funds withheld for reinsurance liabilities:
Call options payable to FSRCI	28,328		22,833
Other liabilities:
Futures contracts	—		1,028
	$	1,673,052	$	1,568,308

The change in fair value of derivative instruments included in the accompanying Condensed Consolidated Statements of Operations is as follows:



	Three months ended
	December 31, 2013			December 31, 2012
Revenues:
Net investment gains (losses):
Call options	$	102,742		$	(20,889	)
Futures contracts	13,110			(4,679		)
Reinsurance related embedded derivative	(4,314		)	—
	$	111,538		$	(25,568	)
Benefits and other changes in policy reserves:
FIA embedded derivatives	$	100,277		$	(33,754	)

Additional Disclosures

Reinsurance Related Embedded Derivatives

Effective December 31, 2012, FGL Insurance entered into a modified coinsurance arrangement with FSRCI, meaning that funds were withheld by FGL Insurance. This arrangement creates an obligation for FGL Insurance to pay FSRCI at a later date, which resulted in an embedded derivative. This embedded derivative is considered a total return swap with contractual returns that are attributable to the assets and liabilities associated with this reinsurance arrangement. The fair value of the total return swap is based on the change in fair value of the underlying assets held in the funds withheld portfolio. Investment results for the assets that support the coinsurance with funds withheld reinsurance arrangement, including gains and losses from sales, are passed directly to the reinsurer pursuant to

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contractual terms of the reinsurance arrangement. The reinsurance related embedded derivative is reported in “Other assets” on the Condensed Consolidated Balance Sheets and the related gains or losses are reported in “Net investment gains” on the Condensed Consolidated Statements of Operations.

Information regarding the Company’s exposure to credit loss on the call options it holds is presented in the following table:



		December 31, 2013								September 30, 2013
Counterparty	Credit Rating (Moody's/S&P) (a)	Notional Amount		Fair Value		Collateral		Net Credit Risk		Notional Amount		Fair Value		Collateral		Net Credit Risk
Merrill Lynch	NA/A	$	2,157,932	$	99,627	$	45,103	$	54,524	$	2,037,781	$	70,695	$	—	$	70,695
Deutsche Bank	A2/A	1,706,800		70,379		—		70,379		1,620,404		51,667		23,000		28,667
Morgan Stanley	A3/A	2,379,038		103,087		74,739		28,348		2,264,136		75,729		49,000		26,729
Royal Bank of Scotland	A3/A	245,300		16,899		—		16,899		364,300		20,313		—		20,313
Barclay's Bank	A2/A	117,835		4,102		—		4,102		120,789		3,354		—		3,354
		$	6,606,905	$	294,094	$	119,842	$	174,252	$	6,407,410	$	221,758	$	72,000	$	149,758

(a) Credit rating as of December 31, 2013.

Collateral Agreements

The Company is required to maintain minimum ratings as a matter of routine practice under its over-the-counter derivative agreements on forms International Swaps and Derivatives Association, Inc (“ISDA”). Under some ISDA agreements, the Company has agreed to maintain certain financial strength ratings. A downgrade below these levels provides the counterparty under the agreement the right to terminate the open derivative contracts between the parties, at which time any amounts payable by the Company or the counterparty would be dependent on the market value of the underlying derivative contracts. The Company’s current rating allows multiple counterparties the right to terminate ISDA agreements. No ISDA agreements have been terminated, although the counterparties have reserved the right to terminate the ISDA agreements at any time. In certain transactions, the Company and the counterparty have entered into a collateral support agreement requiring either party to post collateral when the net exposures exceed pre-determined thresholds. These thresholds vary by counterparty and credit rating. As of December 31, 2013 and September 30, 2013 , counterparties posted $ 119,842 and $ 72,000 of collateral of which 74,739 and 72,000 is included in "Cash and cash equivalents" with an associated payable for this collateral included in "Other liabilities" on the Condensed Consolidated Balance Sheet. The remaining, $45,103 of non-cash collateral was held by a third-party custodian at December 31, 2013 . Accordingly, the maximum amount of loss due to credit risk that the Company would incur if parties to the call options failed completely to perform according to the terms of the contracts was $ 174,252 and $ 149,758 at December 31, 2013 and September 30, 2013 , respectively.

The Company held 1,190 and 1,693 futures contracts at December 31, 2013 and September 30, 2013 , respectively. The fair value of the futures contracts represents the cumulative unsettled variation margin (open trade equity, net of cash settlements). The Company provides cash collateral to the counterparties for the initial and variation margin on the futures contracts which is included in " Cash and cash equivalents " in the accompanying Condensed Consolidated Balance Sheets . The amount of collateral held by the counterparties for such contracts was $4,835 and $5,861 at December 31, 2013 and September 30, 2013 , respectively.

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(6) Fair Value of Financial Instruments

The Company’s measurement of fair value is based on assumptions used by market participants in pricing the asset or liability, which may include inherent risk, restrictions on the sale or use of an asset or non-performance risk, which may include the Company’s own credit risk. The Company’s estimate of an exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability (“exit price”) in the principal market, or the most advantageous market in the absence of a principal market, for that asset or liability, as opposed to the price that would be paid to acquire the asset or receive a liability (“entry price”). The Company categorizes financial instruments carried at fair value into a three-level fair value hierarchy, based on the priority of inputs to the respective valuation technique. The three-level hierarchy for fair value measurement is defined as follows:

Level 1 -Values are unadjusted quoted prices for identical assets and liabilities in active markets accessible at the measurement date.

Level 2 -Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices from those willing to trade in markets that are not active, or other inputs that are observable or can be corroborated by market data for the term of the instrument. Such inputs include market interest rates and volatilities, spreads and yield curves.

Level 3 - Certain inputs are unobservable (supported by little or no market activity) and significant to the fair value measurement. Unobservable inputs reflect the Company’s best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the reporting date based on the best information available in the circumstances.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lower level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment.

When a determination is made to classify an asset or liability within Level 3 of the fair value hierarchy, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement. Because certain securities trade in less liquid or illiquid markets with limited or no pricing information, the determination of fair value for these securities is inherently more difficult. However, Level 3 fair value investments may include, in addition to the unobservable or Level 3 inputs, observable components, which are components that are actively quoted or can be validated to market-based sources.

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The carrying amounts and estimated fair values of the Company’s financial instruments for which the disclosure of fair values is required, including financial assets and liabilities measured and carried at fair value on a recurring basis, with the exception of investment contracts, related party loans, portions of other invested assets and debt, are summarized according to the hierarchy previously described, as follows:



	December 31, 2013
	Level 1		Level 2		Level 3		Fair Value		Carrying Amount
Assets
Cash and cash equivalents	$	759,471	$	—	$	—	$	759,471	$	759,471
Fixed maturity securities, available-for-sale:
Asset-backed securities	—		1,591,978		250,800		1,842,778		1,842,778
Commercial mortgage-backed securities	—		438,653		5,976		444,629		444,629
Corporates	—		9,439,479		607,139		10,046,618		10,046,618
Hybrids	—		418,074		—		418,074		418,074
Municipals	—		1,087,052		34,374		1,121,426		1,121,426
Agency residential mortgage-backed securities	—		91,049		—		91,049		91,049
Non-agency residential mortgage-backed securities	—		1,652,027		—		1,652,027		1,652,027
U.S. Government	502,531		208,485		—		711,016		711,016
Equity securities available-for-sale	—		286,922		—		286,922		286,922
Derivative financial instruments	—		294,531		—		294,531		294,531
Reinsurance related embedded derivative	—		113,710		—		113,710		113,710
Related party loans	—		—		96,442		96,442		96,442
Other invested assets	—		—		316,552		316,552		316,552
Total financial assets at fair value	$	1,262,002	$	15,621,960	$	1,311,283	$	18,195,245	$	18,195,245
Liabilities
Derivatives:
FIA embedded derivatives, included in contractor funds	$	—	$	—	$	1,644,724	$	1,644,724	$	1,644,724
Investment contracts, included in contractholder funds	—		—		12,513,803		12,513,803		13,874,998
Call options payable for FSRCI, included in funds withheld for reinsurance liabilities	—		28,328		—		28,328		28,328
Debt	—		300,000		—		300,000		300,000
Total financial liabilities at fair value	$	—	$	328,328	$	14,158,527	$	14,486,855	$	15,848,050

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	September 30, 2013
	Level 1		Level 2		Level 3		Fair Value		Carrying Amount
Assets
Cash and cash equivalents	$	1,204,334	$	—	$	—	$	1,204,334	$	1,204,334
Fixed maturity securities, available-for-sale:
Asset-backed securities	—		1,518,066		246,528		1,764,594		1,764,594
Commercial mortgage-backed securities	—		448,694		5,635		454,329		454,329
Corporates	—		8,957,196		461,113		9,418,309		9,418,309
Hybrids	—		428,817		—		428,817		428,817
Municipals	—		1,007,010		—		1,007,010		1,007,010
Agency residential mortgage-backed securities	—		98,597		—		98,597		98,597
Non-agency residential mortgage-backed securities	—		1,368,023		—		1,368,023		1,368,023
U.S. Government	790,926		210,921		—		1,001,847		1,001,847
Equity securities available-for-sale	—		271,075		—		271,075		271,075
Derivative financial instruments	—		221,758		—		221,758		221,758
Reinsurance related embedded derivative	—		118,025		—		118,025		118,025
Related party loans	—		—		119,044		119,044		119,044
Other invested assets	—		—		188,180		188,180		188,180
Total financial assets at fair value	$	1,995,260	$	14,648,182	$	1,020,500	$	17,663,942	$	17,663,942
Liabilities
Derivatives:
FIA embedded derivatives, included in contractholder funds	$	—	$	—	$	1,544,447	$	1,544,447	$	1,544,447
Derivative instruments: futures contracts	—		1,028		—		1,028		1,028
Investment contracts, included in contractholder funds	—		—		12,378,645		12,378,645		13,703,769
Call options payable for FSRCI, included in funds withheld for reinsurance liabilities	—		22,833		—		22,833		22,833
Debt	—		300,000		—		300,000		300,000
Total financial liabilities at fair value	$	—	$	323,861	$	13,923,092	$	14,246,953	$	15,572,077

The carrying amounts of accrued investment income, and portions of other insurance liabilities, approximate fair value due to their short duration and, accordingly, they are not presented in the tables above.

Valuation Methodologies

Fixed Maturity Securities & Equity Securities

The Company measures the fair value of its securities based on assumptions used by market participants in pricing the security. The most appropriate valuation methodology is selected based on the specific characteristics of the fixed maturity or equity security, and the Company will then consistently apply the valuation methodology to measure the security’s fair value. The Company's fair value measurement is based on a market approach, which utilizes prices and other relevant information generated by market transactions involving identical or comparable securities. Sources of inputs to the market approach include a third-party pricing service, independent broker quotations or pricing matrices. The Company uses observable and unobservable inputs in its valuation methodologies. Observable inputs include benchmark yields, reported trades, broker-dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. In addition, market indicators and industry and economic events are monitored and further market data will be acquired when certain thresholds are met. For certain security types, additional inputs may be used, or some of the inputs described above may not be applicable. For broker-quoted only securities, quotes from market makers or broker-dealers are obtained from sources recognized to be market participants. Management believes the broker quotes are prices at which trades could be executed based on historical trades executed at broker-quoted or slightly higher prices.

The Company did not adjust prices received from third parties as of December 31, 2013 and September 30, 2013 . However, the Company does analyze the third-party valuation methodologies and its related inputs to perform assessments to determine the appropriate level within the fair value hierarchy.

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Derivative Financial Instruments

The fair value of derivative assets and liabilities is based upon valuation pricing models, which represents what the Company would expect to receive or pay at the balance sheet date if it canceled the options, entered into offsetting positions, or exercised the options. The fair value of futures contracts represents the cumulative unsettled variation margin (open trade equity, net of cash settlements). Fair values for these instruments are determined externally by an independent actuarial firm using market-observable inputs, including interest rates, yield curve volatilities, and other factors. Credit risk related to the counterparty is considered when estimating the fair values of these derivatives. The fair values of the embedded derivatives in the Company’s FIA products are derived using market indices, pricing assumptions and historical data. The fair value of the reinsurance related embedded derivative in the funds withheld reinsurance agreement with FSRCI is estimated based upon the change in the fair value of the assets supporting the funds withheld from reinsurance liabilities. As the fair value of the assets is based on a quoted market price (Level 2), the fair value of the embedded derivative is based on market-observable inputs and is classified as Level 2.

Investment contracts include deferred annuities, FIAs, indexed universal life policies (“IULs”) and immediate annuities. The fair value of deferred annuity, FIA, and IUL contracts is based on their cash surrender value (i.e. the cost the Company would incur to extinguish the liability) as these contracts are generally issued without an annuitization date. The fair value of immediate annuities contracts is derived by calculating a new fair value interest rate using the updated yield curve and treasury spreads as of the respective reporting date. At December 31, 2013 and September 30, 2013 , this resulted in lower fair value reserves relative to the carrying value. The Company is not required to, and has not, estimated the fair value of the liabilities under contracts that involve significant mortality or morbidity risks, as these liabilities fall within the definition of insurance contracts that are exceptions from financial instruments that require disclosures of fair value.

Other Invested Assets

Fair value of our loan participation interest securities has been assessed to be equal to the unpaid principal balance of the participation interest as of December 31, 2013 . In making this assessment the Company considered the sufficiency of the underlying loan collateral, movements in the benchmark interest rate between origination date and December 31, 2013 , the primary market participant for these securities and the short-term maturity of these loans (less than 1 year).

All of the other financial instruments included in other investments, primarily commercial mortgage loans ("CMLs") and policy loans, are carried at amortized cost which approximates fair value. Information on determining the carry value of these investments is described below:

In September 2013, the Company initiated a commercial loan program with Principal Real Estate Investors ("Principal"). The Company has funded seven commercial mortgage loans ("CMLs") originated and serviced by Principal with a fair value of $103,283 at December 31, 2013 which is equal to amortized cost as these loans were recently originated. Principal monitors the status of the payment obligations, the credit quality of the borrower and the property as well as for other events that may impact the performance and principal repayment of the CMLs. Additionally, the Company reviews Principal's valuation methodologies and processes as disclosed in their SSAE 16 to perform assessments. A CMLs' good standing and payment obligations are material factors in evaluating CMLs carrying value. At December 31, 2013, all seven CMLs are performing in good standing and there are no credit or other events which would require impairment evaluation.

Also included in other invested assets are policy loans. We have not attempted to determine the fair values associated with our policy loans, as we believe any differences between carrying value and the fair values afforded these instruments are immaterial to our consolidated financial position and, accordingly, the cost to provide such disclosure does not justify the benefit to be derived.

Related Party Loans & Related Party Investments

The related party loans (discussed in Note 14) carrying value at par approximates fair value, as this is the exit price for the obligation of these loans.

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Quantitative information regarding significant unobservable inputs used for recurring Level 3 fair value measurements of financial instruments carried at fair value as of December 31, 2013 and September 30, 2013 are as follows:



	Fair Value at				Range (Weighted average)
	December 31, 2013		Valuation Technique	Unobservable Input(s)	December 31, 2013
Assets
Asset-backed securities	$	250,800	Broker-quoted	Offered quotes	98.00% - 106.98% (100.61%)
Corporates	540,918		Broker-quoted	Offered quotes	0.00% - 115.00% (91.54%)
Corporates	66,221		Market Pricing	Quoted prices	91.38%-131.62% (98.72%)
Municipal	34,374		Broker-quoted	Offered quotes	98.21%
Commercial mortgage-backed securities	5,976		Broker-quoted	Offered quotes	101.64%
Other invested assets	199,636		Market Pricing	Offered quotes	100.00%
Total	$	1,097,925
Liabilities
Derivatives:
FIA embedded derivatives, included in contractholder funds	$	1,644,724	Discounted cash flow	Market value of option	0% - 43.28% (4.78%)
				SWAP rates	1.79% - 3.09% (2.45%)
				Mortality multiplier	80%
				Surrender rates	0.50% - 75% (7%)
				Non-performance spread	0.25%
Total liabilities at fair value	$	1,644,724



	Fair Value at				Range (Weighted average)
	September 30, 2013		Valuation Technique	Unobservable Input(s)	September 30, 2013
Assets
Asset-backed securities	$	246,528	Broker-quoted	Offered quotes	100.00% - 107.25% (100.91%)
Corporates	404,508		Broker-quoted	Offered quotes	0.00% - 113.00% (90.45%)
Corporates	56,605		Market Pricing	Quoted prices	90.06% - 130.92% (97.19%)
Commercial mortgage-backed securities	5,635		Broker-quoted	Offered quotes	95.50%
Other invested assets	157,000		Market Pricing	Offered quotes	100.00%
Total	$	870,276
Liabilities
Derivatives:
FIA embedded derivatives, included in contractholder funds	$	1,544,447	Discounted cash flow	Market value of option	0% - 38.24% (3.82%)
				SWAP rates	1.54% - 2.77% (2.16%)
				Mortality multiplier	80%
				Surrender rates	0.50% - 75% (7%)
				Non-performance spread	0.25%
Total liabilities at fair value	$	1,544,447

The significant unobservable inputs used in the fair value measurement of FIA embedded derivatives included in contractholder funds are market value of option, interest swap rates, mortality multiplier, surrender rates, and non-performance spread. The mortality multiplier at December 31, 2013 and September 30, 2013 , is based on the 2000 and 1983 annuity tables, respectively and assumes the contractholder population is 50% female and 50% male. Significant increases (decreases) in the market value of option in isolation would result in a higher or lower,

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respectively, fair value measurement. Significant increases or decreases in interest swap rates, mortality multiplier, surrender rates, or non-performance spread in isolation would result in a lower or higher, respectively, fair value measurement. Generally, a change in any one unobservable input would not result in a change in any other unobservable input.

Changes in unrealized losses (gains), net in the Company’s FIA embedded derivatives are included in " Benefits and other changes in policy reserves " in the Condensed Consolidated Statements of Operations .

The following tables summarize changes to the Company’s financial instruments carried at fair value and classified within Level 3 of the fair value hierarchy for the three months ended December 31, 2013 and December 31, 2012 , respectively. This summary excludes any impact of amortization of VOBA and DAC. The gains and losses below may include changes in fair value due in part to observable inputs that are a component of the valuation methodology.



	Three months ended December 31, 2013
	Balance at Beginning of Period		Total Gains (Losses)						Net Purchases, Sales, & Settlements			Net transfer In (Out) of Level 3 (a)		Balance at End of Period
	Balance at Beginning of Period		Included in Earnings			Included in AOCI			Net Purchases, Sales, & Settlements			Net transfer In (Out) of Level 3 (a)		Balance at End of Period
Assets
Fixed maturity securities available-for-sale:
Asset-backed securities	$	246,528	$	—		$	(747	)	$	5,019		$	—	$	250,800
Commercial mortgage-backed securities	5,635		—			363			(22		)	—		5,976
Corporates	461,113		(27		)	(6,098		)	152,151			—		607,139
Municipals	—		—			(626		)	35,000			—		34,374
Other invested assets	157,000		—			—			42,636			—		199,636
Total assets at Level 3 fair value	$	870,276	$	(27	)	$	(7,108	)	$	234,784		$	—	$	1,097,925
Liabilities
FIA embedded derivatives, included in contractholder funds	$	1,544,447	$	100,277		$	—		$	—		$	—	$	1,644,724
Total liabilities at Level 3 fair value	$	1,544,447	$	100,277		$	—		$	—		$	—	$	1,644,724


(a)	There were no net transfers in and/or out of Level 3 during the three months ended December 31, 2013 .



	Three months ended December 31, 2012
	Balance at Beginning of Period		Total Gains (Losses)						Net Purchases, Sales, & Settlements			Net transfer In (Out) of Level 3 (a)			Balance at End of Period
	Balance at Beginning of Period		Included in Earnings			Included in AOCI			Net Purchases, Sales, & Settlements			Net transfer In (Out) of Level 3 (a)			Balance at End of Period
Assets
Fixed maturity securities available-for-sale:
Asset-backed securities	$	15,855	$	—		$	(43	)	$	(18	)	$	(10,500	)	$	5,294
Commercial mortgage-backed securities	5,023		—			81			1,006			—			6,110
Corporates	135,296		(180		)	(1,964		)	122,890			80			256,122
Hybrids	8,873		—			(175		)	—			(3,723		)	4,975
Related party investments	32,000		—			—			—			—			32,000
Total assets at Level 3 fair value	$	197,047	$	(180	)	$	(2,101	)	$	123,878		$	(14,143	)	$	304,501
Liabilities
Fixed indexed annuities	$	1,550,805	$	(33,754	)										$	1,517,051
AFS embedded derivatives	—		—			—			—			—			—
Total liabilities at Level 3 fair value	$	1,550,805	$	(33,754	)	$	—		$	—		$	—		$	1,517,051

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(a)	The net transfers in and out of Level 3 during the three months ended December 31, 2012 were exclusively to or from Level 2.

The Company reviews the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in and out of Level 3, or between other levels, at the beginning fair value for the reporting period in which the changes occur. There were no transfers between Level 1 and Level 2 for the three months ended December 31, 2013 and December 31, 2012 , respectively.

There were no transfers in or out of Level 3 during the three months ended December 31, 2013 . Primary market issuance and secondary market activity for certain asset-backed, hybrid and corporate securities during the three months ended December 31, 2012 increased the market observable inputs used to establish fair values for similar securities. These factors, along with more consistent pricing from third-party sources, resulted in the Company concluding that there is sufficient trading activity in similar instruments to support classifying these securities as Level 2 as of December 31, 2012 . Accordingly, the Company’s assessment resulted in net transfers out of Level 3 of $14,143 related to asset-backed securities, corporates, hybrids, municipals and residential mortgage-backed securities during three months ended December 31, 2012 .

The following tables present the gross components of purchases, sales, and settlements, net, of Level 3 financial instruments for the three months ended December 31, 2013 and December 31, 2012 , respectively. There were no issuances during these periods.



	Three months ended December 31, 2013
	Purchases		Sales		Settlements			Net Purchases, Sales, & Settlements
Assets
Fixed maturity securities available-for-sale:
Asset-backed securities	$	5,038	$	—	$	(19	)	$	5,019
Commercial mortgage-backed securities	—		—		(22		)	(22		)
Corporates	152,684		—		(533		)	152,151
Municipal	35,000		—		—			35,000
Other invested assets	77,755		—		(35,119		)	42,636
Total assets at fair value	$	270,477	$	—	$	(35,693	)	$	234,784



	Three months ended December 30, 2012
	Purchases		Sales			Settlements			Net Purchases, Sales, & Settlements
Assets
Fixed maturity securities available-for-sale:
Asset-backed securities	$	—	$	—		$	(18	)	$	(18	)
Commercial mortgage-backed securities	1,026		—			(20		)	1,006
Corporates	133,175		(9,561		)	(724		)	122,890
Total assets at fair value	$	134,201	$	(9,561	)	$	(762	)	$	123,878

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(7) Intangible Assets

Information regarding VOBA and DAC, DSI, is as follows:



	VOBA			DAC			Total
Balance at September 30, 2012	$	104,320		$	169,223		$	273,543
Deferrals	—			35,697			35,697
Less: Amortization related to:
Unlocking	9,310			2,100			11,410
Interest	5,347			2,327			7,674
Other amortization	(73,536		)	(15,059		)	(88,595		)
Add: Adjustment for unrealized investment gains/losses	31,173			(3,212		)	27,961
Balance at December 31, 2012	$	76,614		$	191,076		$	267,690



	VOBA			DAC			Total
Balance at September 30, 2013	$	225,289		$	338,469		$	563,758
Deferrals	—			52,552			52,552
Less: Amortization related to:
Unlocking	11,656			3,427			15,083
Interest	3,686			3,339			7,025
Other amortization	(29,218		)	(15,782		)	(45,000		)
Add: Adjustment for unrealized investment gains/losses	1,741			6,285			8,026
Balance at December 31, 2013	$	213,154		$	388,290		$	601,444

Amortization of VOBA and DAC is based on the amount of gross margins or profits recognized, including investment gains and losses. The adjustment for unrealized net investment gains represents the amount of VOBA and DAC that would have been amortized if such unrealized gains and losses had been recognized. This is referred to as the “shadow adjustments” as the additional amortization is reflected in AOCI rather than the statement of operations. As of December 31, 2013 and September 30, 2013 , the VOBA balance included cumulative adjustments for net unrealized investment gains/losses of $79,700 and $81,442 respectively, and the DAC balances included cumulative adjustments for net unrealized investment gains/losses of $24,889 and $18,604 , respectively.

The above DAC balances include $29,564 and $26,159 of DSI, net of shadow adjustments, as of December 31, 2013 and September 30, 2013 , respectively.

The weighted average amortization period for VOBA is approximately 4.8 years. Estimated amortization expense for VOBA in future fiscal periods is as follows:



		Estimated Amortization Expense
Fiscal Year		VOBA
2014		33,446
2015		44,769
2016		39,452
2017		32,244
2018		25,946
Thereafter		116,998

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(8) Long Term Debt

In March 2013, FGL's wholly owned subsidiary, Fidelity & Guaranty Life Holdings, Inc. ("FGLH"), issued $300,000 aggregate principal amount of its 6.375% senior notes (“Notes offering”) due April 1, 2021, at par value, which FGLH may elect to redeem after April 1, 2015. Interest payments are due semi-annually, April 1 and October 1, commencing October 1, 2013, and total interest expense was $4,781 for the three months ended December 31, 2013 .

In connection with the Notes offering, FGL capitalized $10,195 of debt issue costs. The fees are classified as “Other assets” in the accompanying Condensed Consolidated Balance Sheets as of December 31, 2013 and are being are amortized over the redemption date using the straight-line method over the remaining term of the debt, of which $ 843 has been amortized for the three months ended December 31, 2013 .

(9) Equity

On November 26, 2013, the Company’s board of directors increased the number of authorized shares of the Company’s common stock, par value $ 0.01 per share, from 100,000 to 500,000,000 and approved a stock split of the issued and outstanding shares of common stock at a ratio of 4,700 -for- 1 , resulting in 47,000,000 shares outstanding. Net income per common share and the weighted average common shares used in computing net income per share for the three months ended December 31, 2013 and 2012, included in the Company’s Consolidated Statement of Operations, have been adjusted to give effect to the stock split. Likewise, the amount of shares authorized, issued, and outstanding disclosed in the Company’s Consolidated Balance sheets have also been adjusted.

In December of 2013 the Company issued 9,750,000 shares of common stock as well as 58,322 unrestricted shares to its directors in connection with its initial public offering ("IPO") and began trading on the New York Stock Exchange under the ticker symbol "FGL." FGL also granted the underwriters an option to purchase an additional 1,462,500 shares of common stock that was subsequently exercised. Subsequent to the offering HGI held 47,000,000 shares of FGL's outstanding common stock, representing an 80.7% interest.

On December 18, 2013, the Company received net proceeds from the IPO of $ 172,996 . A portion of the proceeds were used to pay a special dividend of $ 42,993 to HGI.

(10) Stock Compensation

In conjunction with the IPO, on November 7, 2013, FGL’s Board of Directors adopted a long term stock-based incentive plan (the “FGL 2013 Stock Incentive Plan” or the “Omnibus Plan”) under which certain officers, employees, directors and consultants are eligible to receive equity based awards. The Omnibus Plan was approved by the stockholder on November 19, 2013, became effective on December 12, 2013 and expires in December 2023. FGL’s Compensation Committee approved the granting of awards under the Omnibus Plan to certain employees, officers and directors (other than the members of the Compensation Committee). In addition, FGL’s Board of Directors approved the granting of awards to members of FGL’s Compensation Committee (the “Compensation Committee Awards”). The Compensation Committee Awards were not made under the Omnibus Plan; however, these awards will be construed and administered as if subject to the terms of the Omnibus Plan. FGL’s Board of Directors and stockholder also approved the granting of unrestricted common shares to its directors in lieu of cash compensation at the election of each individual director (the “Unrestricted Share Awards”). The Omnibus Plan, Compensation Committee Awards and the Unrestricted Share Awards are collectively referred to as the “FGL Plans” and are accounted for as equity plans. Prior to the initial public offering, FGL did not offer stock-based compensation plans to any of its directors, employees or the directors or employees of its subsidiaries.

FGL’s principal subsidiary, FGLH, sponsors stock-based incentive plans and dividend equivalent plans (“DEPs”) for its employees (the “FGLH Plans”). Awards under the FGLH Plans are based on the common stock of FGLH. In 2013, FGLH determined that all equity awards will be settled in cash when exercised and therefore are classified as liability plans.

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The Company recognized total stock compensation expense related to the FGL Plans and FGLH Plans as follows:



	Three months ended
	December 31, 2013		December 31, 2012
FGL Plans
Stock options	$	11	$	—
Restricted shares	32		—
Performance restricted stock units	148		—
Unrestricted shares	991		—
	1,182		—
FGLH Plans
Stock Incentive Plan - stock options	2,765		690
2011 DEP	261		207
Amended and Restated Stock Incentive Plan - stock options	2,290		—
Amended and Restated Stock Incentive Plan - restricted stock units	719		—
2012 DEP	113		—
Total stock compensation expense	7,330		897
Related tax benefit	2,566		314
Net stock compensation expense	$	4,764	$	583

The stock compensation expense is included in "Acquisition and operating expenses, net of deferrals" in the Condensed Consolidated Statements of Operations .

Total compensation expense related to the FGL Plans and FGLH Plans not yet recognized as of December 31, 2013 and the weighted-average period over which this expense will be recognized are as follows:



	Unrecognized Compensation Expense		Weighted Average Recognition Period in Years
FGL Plans
Stock options	$	620	3
Restricted shares	1,793		3
Performance restricted stock units	7,824		2.8
Unrestricted shares	—		N/A
	10,237
FGLH Plans
Stock Incentive Plan	1,960		0.7
2011 DEP	277		0.2
Amended and Restated Stock Incentive Plan - stock options	2,784		1.8
Amended and Restated Stock Incentive Plan - restricted stock units	2,091		2
2012 DEP	1,082		2.2
	8,194		0
Total unrecognized stock compensation expense	$	18,431	2.3

FGL Plans

On December 12, 2013, FGL granted 181 thousand stock options to certain officers and directors under the Omnibus Plan and 10 thousand stock options to Compensation Committee members. These stock options vest in equal installments over a period of three years and expire on the seventh anniversary of the grant date. The total fair value of the option grants on the grant date was $ 631 .

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A summary of FGL’s outstanding stock options as of December 31, 2013 , and related activity during the three month period, is as follows (share amount in thousands):



Stock Option Awards	Options	Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
Stock options outstanding at September 30, 2013	—	$	—	$	—
Granted	191	17.00		3.30
Forfeited or expired	—	—		—
Stock options outstanding at December 31, 2013	191	17.00		3.30
Exercisable at December 31, 2013	—	—		—
Vested or expected to vest at December 31, 2013	191	17.00		3.30

The following assumptions were used in the determination of these grant date fair values using the Black-Scholes option pricing model and based on the value of FGL's common stock:



	2013
Risk-free interest rate	1.4%
Assumed dividend yield	1.5%
Expected option term	4.5 years
Volatility	25%

On December 12, 2013, FGL also granted 96 thousand restricted shares to certain officers and directors under the Omnibus Plan and 11 thousand restricted shares to Compensation Committee members. These shares vest in equal installments over a period of three years and expire on the seventh anniversary of the grant date. The total fair value of the restricted shares granted on their grant dates was $ 1,824 .

A summary of FGL’s restricted shares outstanding as of December 31, 2013 , and related activity during the three months then ended, are as follows (share amount in thousands):



Restricted Stock Awards	Shares	Average Grant Date Fair Value
Restricted shares outstanding at September 30, 2013	—	$	—
Granted	107	17.00
Forfeited or expired	—	—
Restricted shares outstanding at December 31, 2013	107	17.00
Exercisable at December 31, 2013	—	—
Vested or expected to vest at December 31, 2013	107	17.00

On December 12, 2013, FGL also granted 469 thousand performance restricted stock units (“PRSUs”) to senior executive officers under the Omnibus Plan. These units vest on September 30, 2016, contingent on the satisfaction of performance criteria and on the officer's continued employment unless, otherwise noted in the agreement. The total fair value of the PRSUs on the grant date was $ 7,973 .

PRSUs subject to vesting are adjusted based on yearly performance, which is evaluated on two non-US GAAP measures: (1) adjusted operating income, and (2) return on equity.

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A summary of PRSUs outstanding as of December 31, 2013 , and related activity during the three months then ended, is as follows (share amount in thousands):



Performance Restricted Stock Units (PRSUs)	Shares	Average grant date fair value
PRSUs outstanding at September 30, 2013	—	$	—
Granted	469	17.00
Forfeited or expired	—	—
PRSUs outstanding at December 31, 2013	469	17.00
Exercisable at December 31, 2013	—	—
Vested or expected to vest at December 31, 2013	469	17.00

Additionally, on December 12, 2013, FGL granted unrestricted shares totaling 58 thousand to certain directors in payment for services rendered. Total fair value of the unrestricted shares on the grant date was $ 991 .

FGLH Plans

A summary of FGLH's outstanding stock options as of December 31, 2013 and changes during the three months then ended are as follows (share amount in thousands):



	FGLH
Stock Option Awards	Options		Weighted Average Exercise Price (a)
Stock options outstanding at September 30, 2013	335		$	44.23
Granted	—		—
Exercised	(28	)	41.79
Forfeited or expired	(1	)	45.55
Stock options outstanding at December 31, 2013	306		44.44
Exercisable at December 31, 2013	129		42.56
Vested or expected to vest at December 31, 2013	296		44.40


(a)	The exercise price is based on the value of FGLH’s common stock, not the value of the Company’s common stock. The fair value of FGLH stock at December 31, 2013 is $83.67 .

A summary of FGLH's restricted stock units outstanding as of December 31, 2013 and related activity during the three months then ended is as follows (share amount in thousands):



Restricted Stock Awards	Shares		Average Grant Date Fair Value (a)
Restricted shares outstanding at September 30, 2013	46		$	49.60
Granted	—		—
Exercised	(15	)	49.45
Forfeited or expired	—		—
Restricted shares outstanding at December 31, 2013	31		49.68
Exercisable at December 31, 2013	—		—
Restricted stock vested or expected to vest at December 31, 2013	28		49.58


(a)	Fair value is based on the value of FGLH’s common stock, not the value of the Company’s common stock.

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(11) Income Taxes

The provision for income taxes represents federal income taxes. The effective tax rate for the three month period ended December 31, 2013 was 34.0% . The effective tax rate for the three month period ended December 31, 2012 was 32.7% . The effective tax rate (“ETR”) on pre-tax income differs from the U.S Federal statutory rate primarily due to current period changes to the Company’s valuation allowance offsetting its deferred tax asset position.

The Company’s tax provision changes quarterly based on recurring and non-recurring factors, including but not limited to, enacted tax legislation, tax audit settlements and changes in judgment from the evaluation of new information resulting in the recognition or de-recognition and/or re-measurement of a tax position taken in a prior period. Changes in judgment related to a tax position are generally recognized in the quarter in which any such change occurs.

(12) Commitments and Contingencies

Contingencies

Regulatory and Litigation Matters

FGL is assessed amounts by the state guaranty funds to cover losses to policyholders of insolvent or rehabilitated insurance companies. Those mandatory assessments may be partially recovered through a reduction in future premium taxes in certain states. At December 31, 2013 , FGL has accrued $ 4,763 for guaranty fund assessments which is expected to be offset by estimated future premium tax deductions of $ 4,591 .

The Company has received inquiries from a number of state regulatory authorities regarding its use of the U.S. Social Security Administration’s Death Master File (the "Death Master File") and compliance with state claims practices regulation. To date, the Company has received inquiries from authorities in Maryland, Minnesota and New York. The New York Insurance Department issued a letter and subsequent regulation requiring life insurers doing business in New York to use the Death Master File or similar databases to determine if benefits were payable under life insurance policies, annuities, and retained asset accounts. Legislation requiring insurance companies to use the Death Master File to identify potential claims has recently been enacted in Maryland and other states. As a result of these legislative and regulatory developments, in May 2012, the Company undertook an initiative to use the Death Master File and other publicly available databases to identify persons potentially entitled to benefits under life insurance policies, annuities and retained asset accounts. During fiscal 2012, the Company incurred an $ 11,000 benefit expense, net of reinsurance, to increase reserves to cover potential benefits payable resulting from this ongoing effort. Based on its analysis to date, and management’s estimate, the Company believes the remaining accrual will cover the reasonably estimated liability arising out of these developments. In addition, the Company has received audit and examination notices from several state agencies responsible for escheatment and unclaimed property regulation in those states. The Company has established a contingency of $ 2,000 , the mid-point of an estimated range of $ 1,000 to $ 3,000 , related to the external legal costs and administrative costs of said audits and examinations. Additional costs that cannot be reasonably estimated as of the date of this filing are possible as a result of ongoing regulatory developments and other future requirements related to this matter.

The Company is involved in various pending or threatened legal proceedings, including purported class actions, arising in the ordinary course of business. In some instances, these proceedings include claims for unspecified or substantial punitive damages and similar types of relief in addition to amounts for alleged contractual liability or requests for equitable relief. In the opinion of management and in light of existing insurance and other potential indemnification, reinsurance and established reserves, such litigation is not expected to have a material adverse effect on the Company’s financial position, although it is possible that the results of operations and cash flows could be materially affected by an unfavorable outcome in any one period.

Guarantees

The First Amended and Restated Stock Purchase Agreement, dated February 17, 2011 (the “F&G Stock Purchase Agreement”) between HFG and OM Group (UK) Limited ("OMGUK") includes a Guarantee and Pledge Agreement which creates certain obligations for FGLH as a grantor and also grants a security interest to OMGUK of FGLH’s equity interest in FGL Insurance in the event that HFG fails to perform in accordance with the terms

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of the F&G Stock Purchase Agreement. The Company is not aware of any events or transactions that resulted in non-compliance with the Guarantee and Pledge Agreement.

(13) Reinsurance

The Company reinsures portions of its policy risks with other insurance companies. The use of reinsurance does not discharge an insurer from liability on the insurance ceded. The insurer is required to pay in full the amount of its insurance liability regardless of whether it is entitled to or able to receive payment from the reinsurer. The portion of risks exceeding the Company's retention limit is reinsured with other insurers. The Company seeks reinsurance coverage in order to limit its exposure to mortality losses and enhance capital management. The Company follows reinsurance accounting when there is adequate risk transfer. Otherwise, the deposit method of accounting is followed. The Company also assumes policy risks from other insurance companies.

The effect of reinsurance on premiums earned, benefits incurred and reserve changes for the three months ended December 31, 2013 and December 31, 2012 were as follows:



	Three months ended
	December 31, 2013						December 31, 2012
	Net Premiums Earned			Net Benefits Incurred			Net Premiums Earned			Net Benefits Incurred
Direct	$	67,753		$	296,480		$	72,448		$	139,560
Assumed	9,271			6,086			12,097			6,559
Ceded	(63,319		)	(85,710		)	(70,749		)	(62,475		)
Net	$	13,705		$	216,856		$	13,796		$	83,644

Amounts payable or recoverable for reinsurance on paid and unpaid claims are not subject to periodic or maximum limits. During the three months ended December 31, 2013 and December 31, 2012 , the Company did not write off any reinsurance balances. During the three months ended December 31, 2013 and December 31, 2012 , the Company did not commute any ceded reinsurance.

No policies issued by the Company have been reinsured with any foreign company, which is controlled, either directly or indirectly, by a party not primarily engaged in the business of insurance.

The Company has not entered into any reinsurance agreements in which the reinsurer may unilaterally cancel any reinsurance for reasons other than non-payment of premiums or other similar credit issues.

(14) Related Party Transactions

Since its inception, the Company has utilized the services of the management and staff of HGI and also shares office space with HGI. The Company recorded approximately $ 0 and $ 7 as contributed capital for such services for the three months ended December 31, 2013 and 2012, respectively. The Company believes these allocations were made on a reasonable basis; however, they do not necessarily represent the costs that would have been incurred by the Company on a stand-alone basis.

FSRCI

Effective December 31, 2012, FGL Insurance entered into a reinsurance treaty with FSRCI, an indirectly wholly-owned subsidiary of HGI, FGL’s parent, whereby FGL ceded 10% of its June 30, 2012 in-force annuity block business not already reinsured on a funds withheld basis. Under the terms of the agreement, FSRCI paid FGL Insurance an initial ceding allowance of $ 15,000 . A study prepared by an independent third party actuarial firm determined that the initial ceding allowance of $15,000 is a fair and reasonable valuation. The coinsurance agreement was on a funds withheld basis, meaning that funds were withheld by FSRCI from the coinsurance premium owed to Front Street Re Ltd. ("Front Street"), a Bermuda-based reinsurer, as collateral for FSRCI’s payment obligations. Accordingly, the collateral assets remain under the ultimate ownership of FGL Insurance.

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At December 31, 2013 and September 30, 2013, the Company's reinsurance recoverable included $ 1,334,724 and $ 1,364,965 , respectively, related to FSRCI and funds withheld for reinsurance liabilities included $ 1,341,497 and $ 1,368,322 , respectively, related to FSRCI.

Below are the ceded operating results to FSRCI’s for the three months ended December 31, 2013:



Revenues:	Three months ended December 31, 2013
Premiums	$	232
Net investment income	15,154
Net investment gains	7,848
Insurance and investment product fees	1,310
Total Revenues	24,544

Benefits and expenses:
Benefits and other changes in policy reserves	(18,605		)
Acquisition & operating expenses, net of deferrals	(2,559		)
Amortization of intangibles	—
Total benefits and expenses	(21,164		)

Operating income	$	3,380

Salus

FGL Insurance participates in loans to third parties originated by Salus, an affiliated company indirectly owned by HGI that provides asset-based financing. In addition to the participation in loans originated by Salus Capital Partners, LLC ("Salus"), FGLH also agreed to provide Salus with financing in the form of a revolving loan.

The Company’s consolidated related party investments as of December 31, 2013 and September 30,2013, and related net investment income for the three months ended December 31, 2013 and 2012 summarized as follows:



		December 31, 2013
Type	Balance Sheet Classification	Asset carrying value		Accrued Investment Income		Total carrying value
Salus collateralized loan obligation (“CLO”)	Fixed Maturities, available for sale	$	241,019	$	635	$	241,654
Salus 2013 participations	Other Invested Assets	199,636		1,517		201,153
HGI energy loan	Related Party Loans, including accrued investment income	70,000		—		70,000
Salus 2012 participations	Related Party Loans, including accrued investment income	5,944		83		6,027
Salus promissory note	Related Party Loans, including accrued investment income	20,000		368		20,368
Salus revolver	Related Party Loans, including accrued investment income	—		46		46

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		September 30, 2013
Type	Balance Sheet Classification	Asset carrying value		Accrued Investment Income		Total carrying value
Salus collateralized loan obligation (“CLO”)	Fixed Maturities, available for sale	$	241,482	$	427	$	241,909
Salus 2013 participations	Other Invested Assets	157,000		1,517		158,517
HGI energy loan	Related Party Loans, including accrued investment income	70,000		1,575		71,575
Salus 2012 participations	Related Party Loans, including accrued investment income	27,287		124		27,411
Salus promissory note	Related Party Loans, including accrued investment income	20,000		12		20,012
Salus revolver	Related Party Loans, including accrued investment income	—		46		46



		Three months ended December 31,
		2013		2012
Type	Investment Income Classification	Net investment income		Net investment income
Salus collateralized loan obligation (“CLO”)	Fixed Maturities	$	2,829	$	—
Salus 2013 participations	Other Invested Assets	4,367		—
HGI energy loan	Related Party Loans	1,575		—
Salus 2012 participations	Related Party Loans	261		1,803
Salus promissory note	Related Party Loans	353		353
Salus revolver	Related Party Loans	139		27

The Company’s pre-closing and closing obligations under the F&G Stock Purchase Agreement, including payment of the purchase price, were guaranteed by the Master Fund. Pursuant to the Transfer Agreement, HGI entered into a Guaranty Indemnity Agreement (the “Guaranty Indemnity”) with the Master Fund, pursuant to which HGI agreed to indemnify the Master Fund for any losses incurred by it or its representatives in connection with the Master Fund’s guaranty of the Company’s pre-closing and closing obligations under the F&G Stock Purchase Agreement.

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(15) Earnings Per Share

The following table sets forth the computation of basic and diluted EPS (share amounts in thousands):



	Three months ended December 31,
	2013		2012
Net income attributable to common shares - basic and diluted	$	42,694	$	110,605

Weighted-average common shares outstanding - basic	49,142		47,000
Dilutive effect of unvested restricted stock and unvested performance restricted stock	119		—
Dilutive effect of stock options	3		—
Weighted-average shares outstanding - diluted	49,264		47,000

Net income per common share:
Basic	$	0.87	$	2.35
Diluted	$	0.87	$	2.35

The number of shares of common stock outstanding used in calculating the weighted average thereof reflects the actual number of FGL shares of common stock outstanding, excluding unvested restricted stock.

(16) Insurance Subsidiary Financial Information and Regulatory Matters

The Company’s insurance subsidiaries file financial statements with state insurance regulatory authorities and the National Association of Insurance Commissioners (“NAIC”) that are prepared in accordance with Statutory Accounting Principles (“SAP”) prescribed or permitted by such authorities, which may vary materially from US GAAP. Prescribed SAP includes the Accounting Practices and Procedures Manual of the NAIC as well as state laws, regulations and administrative rules. Permitted SAP encompasses all accounting practices not so prescribed. The principal differences between statutory financial statements and financial statements prepared in accordance with US GAAP are that statutory financial statements do not reflect DAC and VOBA, some bond portfolios may be carried at amortized cost, assets and liabilities are presented net of reinsurance, contractholder liabilities are generally valued using more conservative assumptions and certain assets are non-admitted. Accordingly, statutory operating results and statutory capital and surplus may differ substantially from amounts reported in the US GAAP basis financial statements for comparable items

On November 1, 2013, Fidelity and Guaranty Life Insurance Company ("FGL Insurance") re-domesticated from Maryland to Iowa. After re-domestication, FGL Insurance elected to apply Iowa-prescribed accounting practices that permit Iowa-domiciled insurers to report equity call options used to economically hedge FIA index credits at amortized cost for statutory accounting purposes and to calculate FIA statutory reserves such that index credit returns will be included in the reserve only after crediting to the annuity contract. This resulted in a $11,517 decrease to statutory capital and surplus. Also, the Iowa Insurance Division granted FGL Insurance a permitted statutory accounting practice to reclassify its negative unassigned surplus balance of $805,818 (unaudited) to additional paid in capital as of April 6, 2011, the date the Company acquired FGL Insurance, which will have the effect of setting FGL Insurance’s statutory unassigned surplus to zero as of this date. The prescribed and permitted statutory accounting practice will have no impact on the Company’s consolidated financial statements which are prepared in accordance with US GAAP.

As of December 31, 2013 Fidelity and Guaranty Life Insurance Company of New York ("FGL NY Insurance")does not follow any prescribed or permitted statutory accounting practices that differ from the NAIC’s statutory accounting practices. However, FGL Insurance’s statutory carrying value of Raven Re reflects the effect of permitted practices Raven Re received. Raven Re is also permitted to follow Iowa prescribed practice statutory accounting for its reserves on reinsurance assumed from FGL Insurance. Without such permitted statutory accounting Raven Re’s statutory capital and surplus would be negative and its risk-based capital would fall below the minimum regulatory requirements.

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On October 7, 2013 the New York State Department of Financial Services (“NYDFS”) announced an agreement with Philip A. Falcone, the Chairman and Chief Executive Officer of HGI (FGL’s ultimate parent company), HGI, FGL and FGL NY Insurance that Mr. Falcone will not exercise control, within the meaning of New York insurance law, over FGL NY Insurance or any other New York-licensed insurer for seven years (the “NYDFS commitment”). Under the NYDFS commitment agreement, FGL agreed to maintain FGL NY Insurance’s risk based capital ("RBC") level at no less than 225% company action level RBC ratio, and established a trust account funded with $18,500 of cash or eligible securities to support that agreement.

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Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

Management's discussion and analysis reviews our consolidated financial position at December 31, 2013 (unaudited) and September 30, 2013, and the unaudited consolidated results of operations for the three month ended December 31, 2013 and 2012 and where appropriate, factors that may affect future financial performance. This analysis should be read in conjunction with our unaudited Consolidated Financial Statements and notes thereto appearing elsewhere in this Form 10-Q and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of FGL, which was included with our audited consolidated financial statements filed on Form 424B4 for the year ended September 30, 2013 included within the Prospectus dated December 12, 2013. Certain statements we make under this Item 2 constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. See "Forward-Looking Statements" in "Part II — Other Information" of this report. You should consider our forward-looking statements in light of our unaudited condensed consolidated financial statements, related notes, and other financial information appearing elsewhere in this report, and our filings with the U.S. Securities & Exchange Commission's (the "SEC"), including our Registration Statement on Form S-1, as amended (File No. 333-190880), which can be found at the SEC's website www.sec.gov. In this Quarterly Report on Form 10-Q we refer to the three months ended December 31, 2013 as the " Fiscal 2014 Quarter ," and the three month ended December 31, 2012 as the " Fiscal 2013 Quarter ."

Overview

We provide our principal life and annuity products through our insurance subsidiaries- Fidelity and Guaranty Life Insurance Company ("FGL Insurance") and Fidelity and Guaranty Life Insurance Company of New York ("FGL NY Insurance"). Our customers range across a variety of age groups and are concentrated in the middle-income market. Our fixed indexed annuities provide for pre-retirement wealth accumulation and post-retirement income management. Our life insurance provides wealth protection and transfer opportunities through indexed universal life products. Life and annuity products are primarily distributed through independent insurance marketing organizations ("IMOs") and independent insurance agents.

Since FGLH's acquisition by HFG on April 6, 2011 (the "FGLH Acquisition"), we have made several significant changes to our business. We have ceded the majority of our life insurance business, with the exception of traditional life products that contain return of premium riders, to Wilton Re to transfer the risk of the lifetime guarantee on a large portion of the universal life insurance line of business; we reduced the number of product offerings to concentrate on capital efficient products and to this end have launched several new FIA products; we began managing a significant portion of our investment portfolio internally; and we repositioned our investment portfolio by shortening the overall duration, all of which are described in more detail below. These changes have positively impacted our recent net income and profitability.

In setting the features and pricing of new FIA sales relative to our targeted net margin, we take into account our expectations regarding (1) net investment spread, which is the difference between the income we earn from investing the FIA premiums and the sum of the interest credited to policyholders and the cost of hedging our risk on the policies; (2) fees, including surrender charges and rider fees, partly offset by vesting bonuses that we pay our policyholders; and (3) a number of related expenses, including benefits and reserves, acquisition costs, and general and administrative expenses.

Trends and Uncertainties

The following factors represent some of the key trends and uncertainties that have influenced the development of our business and our historical financial performance and that we believe will continue to influence our business and financial performance in the future.

Market Conditions

Market volatility has affected and may continue to affect our business and financial performance in varying ways. Volatility can pressure sales and reduce demand as consumers hesitate to make financial decisions. In the long-term, however, we believe that the 2008 through 2010 financial crisis and resultant lingering financial uncertainty will motivate individuals to seek solutions combining elements of capital preservation, income and growth. We believe current market conditions may ultimately enhance the attractiveness of our product portfolio. We continue to monitor the behavior of our customers, as evidenced by mortality rates, morbidity rates, annuitization

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rates and lapse rates, which adjust in response to changes in market conditions in order to ensure that our products and services remain attractive and profitable.

Interest Rate Environment

Certain of our products include guaranteed minimum crediting rates, most notably our fixed rate annuities. As of December 31, 2013, the US GAAP reserves and average crediting rate on our fixed rate annuities were $2.7 billion and 3.5%, respectively. We are required to pay these guaranteed minimum crediting rates even if earnings on our investment portfolio decline, which would negatively impact earnings. In addition, we expect more policyholders to hold policies with comparatively high guaranteed rates for a longer period in a low interest rate environment. Conversely, a rise in average yield on our investment portfolio would positively impact earnings if the average interest rate we pay on our products does not rise correspondingly. Similarly, we expect that policyholders would be less likely to hold policies with existing guarantees as interest rates rise and the relative value of other new business offerings are increased, which would negatively impact our earnings and cash flows.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Quantitative and Qualitative Disclosures about Market Risk” for a more detailed discussion of interest rate risk.

Aging of the U.S. Population

We believe that the aging of the U.S. population will affect the demand for our products. As the “baby boomer” generation prepares for retirement, we believe that demand for retirement savings, growth and income products will grow. The impact of this growth may be offset to some extent by asset outflows as an increasing percentage of the population begins withdrawing assets to convert their savings into income.

Industry Factors and Trends Affecting Our Results of Operations

Demographics and macroeconomic factors are increasing the demand for our FIA and IUL products, for which demand is large and growing: over 10,000 people will turn 65 each day in the United States over the next 15 years. According to the U.S. Census Bureau, the proportion of the U.S. population over the age of 65 is expected to grow from 14.8% in 2015 to 20.3% in 2030.

Due to turbulence in the stock market in 2007 and 2008, many middle-income Americans have grown to appreciate the security these indexed products afford. As a result, the IUL market expanded from $100 million of annual premiums in 2002 to over $1.3 billion of annual premiums in 2012. Similarly, the FIA market grew from nearly $12 billion of sales in 2002 to $34 billion of sales in 2012.

Competition

Our insurance subsidiaries operate in highly competitive markets. We face a variety of large and small industry participants. These companies compete for the growing pool of retirement assets driven by a number of exogenous factors, such as the continued aging of the U.S. population and the reduction in financial safety nets provided by governments and corporations. In many segments, product differentiation is difficult as product development and life cycles have shortened.

Our own sales of annuities and IULs by quarter were as follows:



	Annuity Sales				IUL Sales
(in millions)	Fiscal 2013		Fiscal 2014		Fiscal 2013		Fiscal 2014
Q1	$	247.3	$	540.6	$	5.5	$	5.0

Key Components of Our Historical Results of Operations

Under US GAAP, premium collections for fixed indexed and fixed rate annuities and immediate annuities without life contingency are reported as deposit liabilities (i.e., contractholder funds) instead of as sales or revenues. Similarly, cash payments to customers are reported as decreases in the liability for contractholder funds and not as expenses. Sources of revenues for products accounted for as deposit liabilities are net investment income, surrender and other charges deducted from contractholder funds, and net realized gains (losses) on investments. Components of expenses for products accounted for as deposit liabilities are interest-sensitive and index product

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benefits (primarily interest credited to account balances or the cost of providing index credits to the policyholder), amortization of DAC and VOBA, other operating costs and expenses, and income taxes.

Earnings from products accounted for as deposit liabilities are primarily generated from the excess of net investment income earned over the interest credited or the cost of providing index credits to the policyholder, known as the net investment spread. With respect to FIAs, the cost of providing index credits includes the expenses incurred to fund the annual index credits, and where applicable, minimum guaranteed interest credited. Proceeds received upon expiration or early termination of call options purchased to fund annual index credits are recorded as part of the change in fair value of derivatives, and are largely offset by an expense for index credits earned on annuity contractholder fund balances.

Our profitability depends in large part upon the amount of assets under management (“AUM”), the net investment spreads earned on our average assets under management ("AAUM"), our ability to manage our operating expenses and the costs of acquiring new business (principally commissions to agents and bonuses credited to policyholders). As we grow AUM, earnings generally increase. AUM increases when cash inflows, which include sales, exceed cash outflows. Managing net investment spreads involves the ability to manage our investment portfolios to maximize returns and minimize risks on our AUM such as interest rate changes and defaults or impairment of investments, and our ability to manage interest rates credited to policyholders and costs of the options and futures purchased to fund the annual index credits on the FIAs or IULs. We analyze returns on AAUM pre- and post-DAC and VOBA as well as pre- and post-tax to measure our profitability in terms of growth and improved earnings.

Pretax Adjusted Operating Income ("Pretax AOI") and Return on AAUM

Pretax AOI is a non-U.S. GAAP economic measure we use to evaluate financial performance each period for the periods subsequent to the FGLH Acquisition. Pretax AOI is calculated by adjusting income before income taxes to eliminate (i) interest expense and other, (ii) the impact of net investment gains, excluding gains and losses on derivatives and including net of OTTI losses recognized in operations, (iii) the effect of changes in the rates used to discount the FIA embedded derivative liability and (iv) the effects of transaction-related reinsurance, net of the corresponding VOBA and DAC impact related to these adjustments. These items fluctuate from period-to-period in a manner inconsistent with our core operations. Accordingly, we believe using a measure which excludes their impact is effective in analyzing the trends of our operations.

Return on AAUM is a non-U.S. GAAP measure calculated by dividing Pretax AOI by AAUM. AAUM is the sum of the AUM at the end of each month in the period divided by the number of months in the period.

Together with income before income taxes, we believe Pretax AOI and Return on AAUM provide meaningful financial metrics that helps investors understand our underlying results and profitability. Our Pretax AOI and Return on AAUM may not be comparable to similarly titled measures of other organizations because other organizations may not calculate Pretax AOI and Return on AAUM in the same manner as we do.

Pretax AOI should not be used as a substitute for income before income taxes. However, we believe the adjustments made to operating income in order to derive Pretax AOI are significant to gaining an understanding of our overall results of operations. For example, we could have strong operating results in a given period, yet report income before income taxes that is materially less, if during such period the fair value of our derivative assets hedging the FIA index credit obligations decreased due to general equity market conditions but the embedded derivative liability related to the index credit obligation did not decrease in the same proportion as the derivative assets because of non-equity market factors such as interest rate movements. Similarly, we could also have poor operating results in a given period yet show operating income that is materially greater, if during such period the fair value of the derivative assets increases but the embedded derivative liability did not increase in the same proportion as the derivative assets. We hedge our FIA index credits with a combination of static and dynamic strategies, which can result in earnings volatility, the effects of which are generally likely to reverse over time. Our management and board of directors review Pretax AOI, Return on AAUM and income before income taxes as part of their examination of our overall financial results. However, these examples illustrate the significant impact derivative and embedded derivative movements can have on our income before income taxes. Accordingly, our management and board of directors perform an independent review and analysis of these items, as part of their review of our hedging results each period.

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The adjustments to income before income taxes are net of DAC and VOBA amortization. Amounts attributable to the fair value accounting for derivatives hedging the FIA index credits and the related embedded derivative liability fluctuate from period to period based upon changes in the fair values of call options purchased to fund the annual index credits for FIAs, changes in the interest rates used to discount the embedded derivative liability, and the fair value assumptions reflected in the embedded derivative liability. The accounting standards for fair value measurement require the discount rates used in the calculation of the embedded derivative liability to be based on risk-free interest rates. The impact of the change in risk-free interest rates has been removed from operating income. Additionally, in evaluating our operating results, the effects of acquisition-related reinsurance transactions have been removed from operating income.

In addition, we regularly monitor and report the production volume metric titled “Sales”. Sales are not derived from any specific US GAAP income statement accounts or line items and should not be view as a substitute for any financial measure determined in accordance with US GAAP. Management believes that presentation of sales as measured for management purposes enhances the understanding of our business and helps depict longer term trends that may not be apparent in the results of operations due to the timing of sales and revenue recognition.

The following tables set forth the consolidated results of operations and compares the amount of the change between the fiscal periods (in millions):



	Fiscal Quarter
	2014			2013			Increase / (Decrease)
Revenues:
Premiums	$	13.7		$	13.8		$	(0.1	)
Net investment income	183.4			170.3			13.1
Net investment gains	123.4			146.5			(23.1		)
Insurance and investment product fees and other	15.6			13.7			1.9
Total revenues	336.1			344.3			(8.2		)
Benefits and other changes in policy reserves	216.9			83.6			133.3
Acquisition and operating expenses, net of deferrals	26.0			27.0			(1.0		)
Amortization of intangibles	22.9			69.5			(46.6		)
Total benefits and expenses	265.8			180.1			85.7
Operating Income	70.3			164.2			(93.9		)
Interest expense	(5.6		)	—			(5.6		)
Gain on contingent purchase price reduction	—			—			—
Other income	—			0.2			(0.2		)
Income before income taxes	64.7			164.4			(99.7		)
Income tax expense	(22.0		)	(53.8		)	31.8
Net income	$	42.7		$	110.6		$	(67.9	)

Net income for the Fiscal 2014 Quarter was $42.7 million , a decrease of $67.9 million , from $110.6 million for the Fiscal 2013 Quarter . Income before taxes for the Fiscal 2014 Quarter was $64.7 million , a decrease of $99.7 million , from $164.4 million for the Fiscal 2013 Quarter . The decrease in pre-tax income was primarily due to a decrease in trading gains on our available-for-sale (“AFS”) portfolio, partially offset by an increase in net investment income quarter over quarter. Realized investment gains on AFS securities decreased $115.9 million period over period, net of related DAC and VOBA amortization, due to less trading activity in the Fiscal 2014 Quarter compared to the Fiscal 2013 Quarter . During the Fiscal 2013 Quarter the Company's capitalized on the low interest rate environment by making portfolio re-positioning trades in connection with a tax strategy that was implemented in September 2012. This decrease was partially offset by a $13.1 million increase in investment income due the aforementioned portfolio re-positioning trades which resulted in lower

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excess cash and short-term investments and a corresponding increase in earned yield quarter over quarter. This net decrease in pre-tax income also resulted in a decrease in income taxes for the quarter.

Annuity sales during the Fiscal 2014 Quarter and the Fiscal 2013 Quarter were $540.6 million and $247.3 million , respectively, including $300.7 million and $243.1 million , respectively, of FIA sales. The increase in sales quarter over quarter is primarily due to higher than expected sales for the multi-year guarantee annuity ("MYGA") program as the Company tested the MYGA market during Fiscal 2014 Quarter. FIAs have become the dominant product within the fixed annuity market. Industry growth is expected to continue as individuals nearing retirement increasingly seek the safety and guaranteed income benefits of FIAs.

Revenues

Premiums . For the Fiscal 2014 Quarter , premiums decreased $0.1 million , or 0.7% , to $13.7 million from $13.8 million for the Fiscal 2013 Quarter . Premiums primarily reflect insurance premiums for traditional life insurance products which are recognized as revenue when due from the policyholder. FGL Insurance has ceded the majority of its traditional life business to unaffiliated third party reinsurers. The remaining traditional life business is primarily related to traditional life contracts that contain return of premium riders, which have not been reinsured to third party reinsurers. We expect these revenues to slowly decrease over time as this business continues to run off.

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Net investment income . For the Fiscal 2014 Quarter , net investment income increased $13.1 million , or 7.7% , to $183.4 million from $170.3 million for the Fiscal 2013 Quarter . During the Fiscal 2013 Quarter investment income was impacted by our decision to be defensive with our investment portfolio, given the interest rate environment at the time, and reduce the credit and interest rate risk exposures in the portfolio, as well as shorten the duration of the portfolio relative to our liabilities. In addition, we sold certain investments that utilized pre-acquisition tax benefits (carryforwards) which resulted in tax free capital gains. These strategies resulted in significant sales of investments during the Fiscal 2013 Quarter . The proceeds from the investment sales, including the tax free gains, were primarily held in cash, cash equivalents and treasury notes, which temporarily lowered investment income until the proceeds were reinvested. We began reinvesting the sales proceeds in September 2013 and saw a substantial increase in earned yield during the Fiscal 2014 Quarter . We continued our reinvestment strategy during the Fiscal 2014 Quarter resulting in a decrease in cash and short-term investments of $1,302.4 million from December 31, 2012 to December 31, 2013 and a corresponding increase in earned yield and net investment income during the Fiscal 2014 Quarter .

The Company’s cash and short-term investments position is summarized as follows:



	Fiscal Quarter
(in $ millions)	2014		2013
Q1	$	1,262.0	$	2,564.4

AAUM (on an amortized cost basis) was $15.6 billion and $16.3 billion and the average yield earned on AAUM was 4.8% and 4.3% (annualized) for the Fiscal 2014 Quarter and the Fiscal 2013 Quarter , respectively, compared to interest credited and option costs of 3.2% and 3.2% (annualized) for each period, respectively.

Our net investment spread for the period is summarized as follows (annualized):



	Fiscal Quarter
	2014		2013
Average yield on invested assets	4.8	%	4.3	%
Less: Interest credited and option cost	3.2	%	3.2	%
Net investment spread	1.6	%	1.1	%

The net investment spread for the Fiscal 2014 Quarter is 0.5% higher than for the Fiscal 2013 Quarter due to the re-investment strategy discussed above, which resulted in a decrease in cash and short-term investments and an increase in average yield earned and net investment income.

Net investment gains . For the Fiscal 2014 Quarter , we had net investment gains of $123.4 million compared to net investment gains of $146.5 million for the Fiscal 2013 Quarter . The period over period decrease of $23.1 million is primarily due to $12.0 million of net investment gains on fixed maturity and equity available-for-sale securities in the Fiscal 2014 Quarter , compared to net investment gains of $172.0 million for the Fiscal 2013 Quarter . The $160.0 million decrease period over period is primarily due to our portfolio repositioning trading activity during the Fiscal 2013 Quarter as described above.

Partially offsetting the decrease in gains on fixed maturity and equity available-for-sale securities quarter over quarter, was an increase in net realized and unrealized gains on futures contracts and call options of $141.5 million primarily resulting from the performance of the indices upon which the call options and futures contracts are based. We utilize a combination of static (call options) and dynamic (long futures contracts) instruments in our hedging strategy. A substantial portion of the call options and futures contracts are based upon the S&P 500 index with the remainder based upon other equity and bond market indices. The S&P 500 index increased 10% and decreased 1% during the Fiscal 2014 Quarter and the Fiscal 2013 Quarter , respectively (the percentages noted are a fiscal quarter over quarter comparison of the growth of the S&P 500 Index only and do not reflect the change for each option buy date). Accordingly, we experienced net unrealized gains on equity options of $55.8 million during the Fiscal 2014 Quarter compared to net unrealized losses of $(43.8) million in the Fiscal 2013 Quarter , an increase of $99.6 million quarter over quarter.

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The components of the realized and unrealized gains on derivative instruments are as follows (in millions):



	Fiscal Quarter					Increase / (Decrease)
	2014		2013			2014 compared to 2013
Call options:
Gain (loss) on option expiration	$	47	$	22.9		$	24.1
Change in unrealized gain (loss)	55.8		(43.8		)	99.6
Futures contracts:
Gain (loss) on futures contracts expiration	13.1		(7.2		)	20.3
Change in unrealized gain (loss)	—		2.5			(2.5		)
	$	115.9	$	(25.6	)	$	141.5

The average index credits to policyholders were as follows:



	Fiscal Quarter
	2014		2013
S&P 500 Index:
Point-to-point strategy	5.2	%	4.9	%
Monthly average strategy	5.4	%	5.0	%
Monthly point-to-point strategy	8.4	%	2.9	%
3 Year high water mark	18.8	%	18.7	%

For the Fiscal 2014 Quarter , the average credit to contractholders from index credits during the period was 6.6% compared to 4.4% for the Fiscal 2013 Quarter . The credits for the Fiscal 2014 Quarter were based on comparing the S&P 500 Index on each issue date in the Fiscal 2014 Quarter to the same issue date in the Fiscal 2013 Quarter . The volatility at different points in these periods created lower overall monthly point-to-point credits in the Fiscal 2013 Quarter compared to the S&P 500 Index growth for issue dates in the Fiscal 2014 Quarter .

Actual amounts credited to contractholder fund balances may differ from the index appreciation due to contractual features in the FIA contracts (caps, spreads, participation rates and asset fees) which allow the Company to manage the cost of the options purchased to fund the annual index credits.

Insurance and investment product fees and other . Insurance and investment product fees and other consists primarily of the cost of insurance, policy rider fees and surrender charges assessed against policy withdrawals in excess of the policyholder’s allowable penalty-free amounts (up to 10% of the prior year’s value, subject to certain limitations). These revenues increased $1.9 million , or 13.9% to $15.6 million , for the Fiscal 2014 Quarter from $13.7 million for Fiscal 2013 Quarter . These increases are primarily due to the growth in sales of our IUL and FIA products and the associated product fees associated with them over the past year.

Benefits and expenses

Benefits and other changes in policy reserves . For the Fiscal 2014 Quarter , benefits and other changes in policy reserves increased $133.3 million , or 159.4% , to $216.9 million , from $83.6 million for the Fiscal 2013 Quarter principally due to the FIA market value liability which increased $74.5 million during the Fiscal 2014 Quarter compared to a $68.1 million decrease during the Fiscal 2013 Quarter . The FIA market value liability is directly correlated with the change in market value of the derivative assets hedging our FIA policies. Accordingly, the period over period increase of $142.6 million was primarily due to the equity market movements during these respective quarters (see the net investment gain discussion above for details on the change in market value of our derivative assets quarter over quarter).

Partially offsetting this increase was the FIA present value of future credits and guarantee liability change, which decreased $47.7 million during the Fiscal 2014 Quarter compared to an $18.6 million decrease during the Fiscal 2013 Quarter . The period over period decrease of $29.1 million was primarily driven by the increase in risk free rates quarter over quarter, which reduced reserves by $34.3 million and $12.2 million during the Fiscal 2014 Quarter and the Fiscal 2013 Quarter , respectively.

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Below is a summary of the major components included in Benefits and other changes in policy reserves for the Fiscal 2014 and 2013 Quarters:



	Fiscal Quarter						Increase / (Decrease)
	2014			2013			2014 compared to 2013
FIA market value option liability	$	74.5		$	(68.1	)	$	142.6
FIA present value future credits & guarantee liability change	(47.7		)	(18.6		)	(29.1		)
Index credits, interest credited & bonuses	149.3			133.2			16.1
Annuity Payments	52.6			59.9			(7.3		)
Other policy benefits and reserve movements	(11.8		)	(22.8		)	11.0
Total benefits and other changes in policy reserves	$	216.9		$	83.6		$	133.3

Acquisition, operating and general expenses, net of deferrals . A cquisition, and operating expenses, net of deferrals, decreased $1.0 million , or 3.7% , to $26.0 million for the Fiscal 2014 Quarter , from $27.0 million for the Fiscal 2013 Quarter , principally due to a decrease in general operating expenses resulting from a Company-wide initiative to reduce excess discretionary operating expenses.

Amortization of intangibles . For the Fiscal 2014 Quarter , amortization of intangibles decreased $46.6 million , or 67.1% , to $22.9 million from $69.5 million for the Fiscal 2013 Quarter . Amortization of intangibles is based on historical, current and future expected gross margins (pre-tax operating income before amortization). Accordingly, the decrease in amortization quarter over quarter was primarily driven by a decrease in the current gross margins caused by the change in realized gains discussed above.

Other items affecting net income

Interest expense. Interest expense for the Fiscal 2014 Quarter was $5.6 million , compared to interest expense of $0.0 million during the Fiscal 2013 Quarter . The increase in interest expense in the Fiscal 2014 Quarter is due to interest incurred on the $300.0 million of outstanding 6.375% senior notes (the "Senior Notes") issued by FGLH in March 2013. The outstanding Senior Notes pay interest semi-annually at a coupon rate of 6.375%.

Income tax expense (benefit ). Income tax expense for the Fiscal 2014 Quarter was $22.0 million , net of a valuation allowance release of $0.6 million, compared to an income tax expense of $53.8 million for the Fiscal 2013 Quarter , net of a valuation allowance release of $0.8 million. The decrease in income tax expense of $ 31.8 million quarter over quarter is primarily due to a decrease in pre-tax income of $99.7 million .

In assessing the recoverability of its deferred tax assets, management regularly considers the guidance outlined within ASC 740 (“Income Taxes”). The guidance requires an assessment of both positive and negative evidence in determining the realizability of deferred tax assets. A valuation allowance is required to reduce the Company’s deferred tax asset to an amount that is more likely than not to be realized. In determining the net deferred tax asset and valuation allowance, management is required to make judgments and estimates related to projections of future profitability. These judgments include the following: the timing and extent of the utilization of net operating loss carry-forwards, the reversals of temporary differences, and tax planning strategies. The Company has recorded a partial valuation allowance of $158.0 million against its gross deferred tax assets of $383.9 million as of December 31, 2013.

The Company maintains a valuation allowance against certain U.S. Internal Revenue Code, Section 382 ("Section 382") limited capital loss carry forwards and the deferred tax assets of its non-life insurance company subsidiaries. A valuation allowance has been placed against Section 382 limited capital loss carry forwards to reduce these deferred tax assets to an amount that is more-likely than not to be realized before the attributes expire. The non-life insurance company subsidiaries have a history of losses and insufficient sources of future income in order to recognize any portion of their deferred tax assets.

The valuation allowance is reviewed quarterly and will be maintained until there is sufficient positive evidence to support a release. At each reporting date, management considers new evidence, both positive and negative, that could impact the future realization of deferred tax assets. Management will consider a release of the valuation allowance once there is sufficient positive evidence that it is more likely than not that the deferred tax assets will be realized. Any release of the valuation allowance will be recorded as a tax benefit increasing net income or other comprehensive income. The valuation allowance was decreased by $0.6 million for the three months-ended December 31, 2013. The adjustment is

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due to previously unrealizable capital loss carry forwards that can now be utilized during the current fiscal year, which was partially offset by a full valuation allowance placed against the current period income tax benefit of the non-life subsidiaries.

Pretax AOI

The table below shows the adjustments made to reconcile income before income taxes to our Pretax AOI and Return on AAUM:



	Fiscal Quarter
Reconciliation to income before income taxes:	2014			2013
Income before taxes	$	64.7		$	164.4
Interest expense and other	5.6			(0.2		)
Operating income (loss)	70.3			164.2
Effect of investment (gains) losses, net of offsets	(9.8		)	(125.7		)
Effect of change in FIA embedded derivative discount rate, net of offsets	(20.4		)	(6.6		)
Effects of transaction-related reinsurance	4.0			—
Pretax AOI	$	44.1		$	31.9

AAUM	$	15,588.4		$	16,349.3
Return on AAUM	0.3		%	0.2		%

For the Fiscal 2014 Quarter , Pretax AOI increased $12.2 million to $44.1 million , from $31.9 million for the Fiscal 2013 Quarter . The increase is primarily due to higher fee income and an increase in net investment spread during the Fiscal 2014 Quarter as discussed above.

AAUM was $15.6 billion and the Return on AAUM was 0.3% for the Fiscal 2014 Quarter . AAUM was $16.3 billion and the Return on AAUM was 0.2% for the Fiscal 2013 Quarter .

Investment Portfolio

The types of assets in which we may invest is influenced by various state laws, which prescribe qualified investment assets applicable to insurance companies. Within the parameters of these laws, we invest in assets giving consideration to three primary investment objectives: (i) maintain robust absolute returns; (ii) provide reliable yield and investment income; and (iii) preserve capital.

Our investment portfolio is designed to contribute stable earnings and balance risk across diverse asset classes and is primarily invested in high quality fixed income securities.

As of December 31, 2013 and September 30, 2013 , the fair value of our investment portfolio was approximately $ 17.2 billion and $ 16.2 billion , respectively, and was divided among the following asset classes:



(dollars in millions)	December 31, 2013				September 30, 2013
Asset Class	Fair Value		Percent		Fair Value		Percent
Corporates	$	10,046.6	58.3	%	$	9,418.3	58.1	%
ABS	1,842.8		10.7	%	1,764.6		10.9	%
Non-agency RMBS	1,652.0		9.6	%	1,368.0		8.4	%
Municipals	1,121.4		6.5	%	1,007.0		6.2	%
U.S. Government	711.0		4.1	%	1,001.8		6.2	%
Other (primarily derivatives, policy loans and CML)	611.2		3.6	%	410.0		2.5	%
Commercial mortgage-backed securities	444.6		2.6	%	454.3		2.8	%
Hybrids	418.1		2.4	%	428.8		2.6	%
Equities (a)	286.9		1.7	%	271.1		1.7	%
Agency RMBS	91.0		0.5	%	98.6		0.6	%
Total investments	$	17,225.6	100.0	%	$	16,222.5	100.0	%

(a) Includes investment grade non-redeemable preferred stocks ($242.6 million and $226.3 million, respectively) and Federal Home Loan Bank of Atlanta common stock ($44.3 million and $44.6 million, respectively).

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Insurance statutes regulate the type of investments that our life insurance subsidiaries are permitted to make and limit the amount of funds that may be used for any one type of investment. In light of these statutes and regulations, and our business and investment strategy, we generally seek to invest in (i) corporate securities rated investment grade by established nationally recognized statistical rating organizations (each, an “NRSRO”), (ii) U.S. Government and government-sponsored agency securities, or (iii) securities of comparable investment quality, if not rated.

As of December 31, 2013 and September 30, 2013 , our fixed maturity AFS securities portfolio was approximately $16.3 billion and $ 15.5 billion , respectively. The increase in B and below investments from September 30, 2013 to December 31, 2013 is primarily due to the acquisition of certain non-agency RMBS securities, which carry a NAIC 1 designation. The following table summarizes the credit quality, by NRSRO rating, of our fixed income portfolio:



(dollars in millions)	December 31, 2013				September 30, 2013
Rating	Fair Value		Percent		Fair Value		Percent
AAA	$	1,683.1	10.3	%	$	1,924.3	12.4	%
AA	2,390.6		14.7	%	2,423.1		15.6	%
A	4,039.4		24.7	%	3,791.3		24.4	%
BBB	5,968.2		36.6	%	5,508.6		35.4	%
BB (a)	528.0		3.2	%	468.2		3.0	%
B and below (b)	1,718.2		10.5	%	1,426.0		9.2	%
Total	$	16,327.5	100.0	%	$	15,541.5	100.0	%

(a) Includes $36.6 million and $31.4 million at December 31, 2013 and September 30, 2013 , respectively, of non-agency RMBS that carry a NAIC 1 designation.

(b) Includes $1,396.7 million and $1,096.3 million at December 31, 2013 and September 30, 2013 , respectively, of non-agency RMBS that carry a NAIC 1 designation.

The NAIC’s Securities Valuation Office ("SVO") is responsible for the day-to-day credit quality assessment and valuation of securities owned by state regulated insurance companies. Insurance companies report ownership of securities to the SVO when such securities are eligible for regulatory filings. The SVO conducts credit analysis on these securities for the purpose of assigning an NAIC designation or unit price. Typically, if a security has been rated by an NRSRO, the SVO utilizes that rating and assigns an NAIC designation based upon the following system:



NAIC Designation		NRSRO Equivalent Rating
1		AAA/AA/A
2		BBB
3		BB
4		B
5		CCC and lower
6		In or near default

The NAIC adopted revised designation methodologies for non-agency RMBS, including RMBS backed by subprime mortgage loans and for commercial mortgage-backed ("CMBS"). The NAIC’s objective with the revised designation methodologies for these structured securities was to increase accuracy in assessing expected losses and to use the improved assessment to determine a more appropriate capital requirement for such structured securities. The NAIC designations for structured securities, including subprime and Alternative A-paper ("Alt-A"), RMBS, are based upon a comparison of the bond’s amortized cost to the NAIC’s loss expectation for each security. Securities where modeling results in no expected loss in all scenarios are given the highest designation of NAIC 1. A large percentage of our RMBS securities carry a NAIC 1 designation while the NRSRO rating indicates below investment grade. This is primarily due to credit and change of intent impairments recorded by us which reduced the amortized cost on these securities to a level resulting in no expected loss in all scenarios, which corresponds to a NAIC 1 designation. The revised methodologies reduce regulatory reliance on rating agencies and allow for greater regulatory input into the assumptions used to estimate expected losses from such structured securities. In the tables below, we present the rating of structured securities based on ratings from the revised NAIC rating methodologies described above (which may not correspond to rating agency designations). All NAIC designations (e.g., NAIC 1-6) are based on the revised NAIC methodologies.

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The tables below present our fixed maturity securities by NAIC designation as of December 31, 2013 and September 30, 2013 :



(dollars in millions)	December 31, 2013
NAIC Designation	Amortized Cost		Fair Value		Percent of Total Fair Value
1	$	9,614.5	$	9,812.0	60.0	%
2	5,743.0		5,761.4		35.3	%
3	399.1		408.1		2.5	%
4	270.5		271.5		1.7	%
5	74.8		73.7		0.5	%
6	0.9		0.9		—	%
	$	16,102.8	$	16,327.7	100.0	%
	September 30, 2013
NAIC Designation	Amortized Cost		Fair Value		Percent of Total Fair Value
1	$	9,342.0	$	9,554.0	61.5	%
2	5,362.2		5,379.3		34.6	%
3	405.0		415.4		2.7	%
4	132.7		133.0		0.9	%
5	53.9		53.8		0.3	%
6	5.9		6.0		—	%
	$	15,301.7	$	15,541.5	100.0	%

The amortized cost and fair value of fixed maturity AFS securities by contractual maturities as of December 31, 2013 and September 30, 2013 , as applicable, are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.



	December 31, 2013				September 30, 2013
(in millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Corporate, Non-structured Hybrids, Municipal and U.S. Government securities:
Due in one year or less	$	345.5	$	348.1	$	978.5	$	982.4
Due after one year through five years	3,059.2		3,133.2		2,739.1		2,805.8
Due after five years through ten years	3,315.1		3,332.1		2,972.4		3,000.9
Due after ten years	5,444.4		5,448.3		5,007.5		5,037.5
Subtotal	$	12,164.2	$	12,261.7	$	11,697.5	$	11,826.6
Other securities which provide for periodic payments:
Asset-backed securities	$	1,830.2	$	1,842.8	$	1,745.2	$	1,764.6
Commercial-mortgage-backed securities	422.6		444.6		431.3		454.3
Structured hybrids	32.8		35.5		27.1		29.4
Agency residential mortgage-backed securities	88.9		91.0		96.5		98.6
Non-agency residential mortgage-backed securities	1,564.1		1,652.0		1,304.0		1,368.0
Total fixed maturity available-for-sale securities	$	16,102.8	$	16,327.6	$	15,301.6	$	15,541.5

Non-Agency RMBS Exposure

In late 2011 and 2012, following stabilization in the housing market, and a review of the loss severity methodology utilized by the NAIC, which took into account home price appreciation vectors, rather than NRSRO ratings criteria, we began to increase exposure to non-agency RMBS securities across the spectrum. These investment decisions were driven by rigorous analysis of the underlying collateral, as well as considerations of structural characteristics associated with these positions.

In all cases, we have been buyers of non-agency RMBS securities in the secondary market. We do not originate non-agency whole loans, regardless of underlying collateral.

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Our investment in non-agency RMBS securities is predicated by the conservative and adequate cushion between purchase price and NAIC 1 rating, favorable capital characteristics, general lack of sensitivity to interest rates, positive convexity to prepayment rates and correlation between the price of the securities and the unfolding recovery of the housing market. We believe incremental purchases of non-agency RMBS securities bring our asset allocation back more in line with typical life insurance company’s structured exposure.

The fair value of our investments in subprime and Alt-A RMBS securities was $453.7 million and $520.0 million as of December 31, 2013 , respectively, and $360.7 million and $ 394.9 million as of September 30, 2013 , respectively. We continue to focus on NAIC 1 and 2 rated investments and have reduced our exposure to NAIC 4 or lower rated investments since September 30, 2013.

The following tables summarize our exposure to subprime and Alt-A RMBS by credit quality using NAIC designations, NRSRO ratings and vintage year as of December 31, 2013 and September 30, 2013 :



	NAIC Designation			NRSRO			Vintage
As of December 31, 2013	1	96.8	%	AAA	3.7	%	2007	17.8	%
	2	2.4	%	AA	1.8	%	2006	31.9	%
	3	0.6	%	A	7.7	%	2005 and prior	50.3	%
	4	0.2	%	BBB	2.6	%		100.0	%
	5	—	%	BB and below	84.2	%
	6	—	%		100.0	%
		100.0	%
As of September 30, 2013	1	92.5	%	AAA	4.8	%	2007	21.8	%
	2	6.0	%	AA	2.3	%	2006	23.9	%
	3	0.7	%	A	8.7	%	2005 and prior	54.3	%
	4	0.5	%	BBB	3.9	%		100.0	%
	5	0.3	%	BB and below	80.3	%
	6	—	%		100.0	%
		100.0	%

ABS Exposure

As of December 31, 2013 , our asset backed security ("ABS") exposure was largely composed of NAIC 1 rated tranches of CLOs, which comprised 91.9% of all ABS holdings. These exposures, are generally senior tranches of collateralized loan obligations ("CLOs"), which have leveraged loans as their underlying collateral. The remainder of our ABS exposure was largely diversified by underlying collateral and issuer type, including credit card and automobile receivables and home equity-backed securities.

The following tables summarize our ABS exposure. The non-CLO exposure represents 8.1% of total ABS assets, or 0.9% of total invested assets. As of December 31, 2013 , the CLO and non-CLO positions were trading at a net unrealized gain position of $10.8 million and $1.8 million, respectively.

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The non-CLO exposure as of September 30, 2013 represented 11.1% of total ABS assets, or 1.2% , of total invested assets. As of September 30, 2013 , the CLO and non-CLO positions were trading at a net unrealized gain position of $20.4 million and $(1.0) million, respectively.



(dollars in millions)	December 31, 2013				September 30, 2013
Asset Class	Fair Value		Percent		Fair Value		Percent
ABS CLO	$	1,692.7	91.9	%	$	1,569.4	88.9	%
ABS Car Loan	11.9		0.6	%	11.7		0.7	%
ABS Home Equity	8.8		0.5	%	68.1		3.9	%
ABS Other	121.5		6.6	%	107.3		6.1	%
ABS Utility	7.9		0.4	%	8.0		0.5	%
Total ABS	$	1,842.8	100.0	%	$	1,764.5	100.0	%

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Unrealized Losses

The amortized cost and fair value of the fixed maturity securities and the equity securities that were in an unrealized loss position as of December 31, 2013 and September 30, 2013 were as follows:



	December 31, 2013
(in millions)	Number of securities	Amortized Cost		Unrealized Losses			Fair Value
Fixed maturity securities, available for sale:
United States Government full faith and credit	21	$	345.1	$	(6.2	)	$	338.9
United States Government sponsored agencies	14	11.6		(0.1		)	11.5
United States municipalities, states and territories	87	691.3		(45.0		)	646.3
Corporate securities:
Finance, insurance and real estate	180	1,941.0		(86.9		)	1,854.1
Manufacturing, construction and mining	56	536.8		(31.8		)	505.0
Utilities and related sectors	83	657.1		(23.4		)	633.7
Wholesale/retail trade	45	362.3		(13.9		)	348.4
Services, media and other	51	525.3		(33.2		)	492.1
Hybrid securities	11	117.7		(3.2		)	114.5
Non-agency RMBS	84	421.0		(11.3		)	409.7
CMBS	16	38.5		(3.2		)	35.3
ABS	76	632.6		(8.2		)	624.4
Equity securities	19	152.4		(13.8		)	138.6
	743	$	6,432.7	$	(280.2	)	$	6,152.5



	September 30, 2013
(in millions)	Number of securities	Amortized Cost		Unrealized Losses			Fair Value
Fixed maturity securities, available for sale:
United States Government full faith and credit	18	$	758.8	$	(3.9	)	$	754.9
United States Government sponsored agencies	17	10.1		(0.2		)	9.9
United States municipalities, states and territories	71	518.5		(40.8		)	477.7
Corporate securities:
Finance, insurance and real estate	170	1,867.8		(84.2		)	1,783.6
Manufacturing, construction and mining	48	537.1		(36.0		)	501.1
Utilities and related sectors	73	546.8		(19.2		)	527.6
Wholesale/retail trade	45	362.9		(13.6		)	349.3
Services, media and other	50	513.7		(32.1		)	481.6
Hybrid securities	6	55.3		(3.3		)	52.0
Non-agency RMBS	85	408.5		(13.4		)	395.1
CMBS	10	33.0		(1.6		)	31.4
ABS	56	416.0		(5.2		)	410.8
Equity securities	17	161.1		(10.3		)	150.8
	666	$	6,189.6	$	(263.8	)	$	5,925.8

The gross unrealized loss position on the portfolio as of December 31, 2013 , was $ 280.2 million , an increase of $16.4 million from $ 263.8 million as of September 30, 2013 . The following is a description of the factors that FGL believes caused the increase in the gross unrealized loss. Through December 31, 2013 , treasury yields climbed as concerns about the cessation of Federal Reserve stimulus affected market participants. Bond mutual fund flows turned sharply negative in the last months of the quarter, and fixed income security prices declined accordingly.

Our municipal bond exposure is a combination of general obligation bonds (fair value of $ 328.9 million and an amortized cost of $ 332.1 million as of December 31, 2013 ) and special revenue bonds (fair value of $ 793.0 million and amortized cost of $ 789.0 million as of December 31, 2013 ). Across all municipal bonds, the largest

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issuer represented 7.9% of the category, and the largest single municipal bond issuer represents less than 0.5% of the entire portfolio and is rated NAIC 1. Our focus within municipal bonds is on NAIC 1 rated instruments, and 99.9% of our municipal bond exposure is rated NAIC 1. We have no exposure to troubled municipalities, including the City of Detroit.

Finance and finance-related corporates and hybrids remain the largest dollar component of the $280.2 million unrealized loss position. Although as a percentage of overall unrealized loss position, this segment has been relatively stable at 31% of the total unrealized loss, we view the increase in the unrealized loss position as a function of higher treasury yields. The unrealized loss position in non-agency RMBS decreased from $ 13.4 million as of September 30, 2013 to $11.3 million as of December 31, 2013 , as this asset class strengthened on growing conviction, and firming fundamentals within the housing market. We continue to see the underlying fundamentals in non-agency RMBS class as relatively stable, and potentially, less subject to interest rate volatility. We will remain open to opportunities within the structured mortgage market.

The amortized cost and fair value of fixed maturity securities and equity securities (excluding U.S Government and U.S. Government-sponsored agency securities) in an unrealized loss position greater than 20% and the number of months in an unrealized loss position with fixed maturity investment grade securities (NRSRO rating of BBB/Baa or higher) as of December 31, 2013 and September 30, 2013 , were as follows:



	December 31, 2013								September 30, 2013
	Number of securities	Amortized Cost		Fair Value		Gross Unrealized Losses			Number of securities	Amortized Cost		Fair Value		Gross Unrealized Losses
Investment grade:
Less than six months	—	$	—	$	—	$	—		9	$	78.3	$	60.9	$	(17.4	)
Six months or more and less than twelve months	11	99.2		77.0		(22.2		)	—	—		—		—
Twelve months or greater	—	—		—		—			1	0.6		—		(0.6		)
Total investment grade	11	99.2		77.0		(22.2		)	10	78.9		60.9		(18.0		)

Below investment grade:
Less than six months	1	0.4		0.1		(0.3		)	1	—		—		—
Six months or more and less than twelve months	2	—		—		—			1	—		—		—
Twelve months or greater	3	2.4		—		(2.4		)	2	0.4		—		(0.4		)
Total below investment grade	6	2.8		0.1		(2.7		)	4	0.4		—		(0.4		)
Total	17	$	102.0	$	77.1	$	(24.9	)	14	$	79.3	$	60.9	$	(18.4	)

As of December 31, 2013 , we held (i) one security that was in an unrealized loss position less than six months, (ii) thirteen securities that were in an unrealized loss position greater than six months but less than twelve months and (iii) three securities that were in an unrealized loss position greater than twelve months. This included eleven investment grade securities (NRSRO rating of BBB/Baa or higher) with an amortized cost and an estimated fair value of $ 99.2 million and $ 77.0 million , respectively as well as six securities below investment grade with an amortized cost and an estimated fair value of $ 2.8 million and $ 0.1 million , respectively.

As of September 30, 2013 , we held (i) ten securities that had unrealized losses greater than 20% that were in an unrealized loss position less than six months, (ii) one security that was in an unrealized loss position greater than six months but less than twelve months and (iii) three securities that were in an unrealized loss position greater than twelve months. This included ten investment grade securities (NRSRO rating of BBB/Baa or higher) with an amortized cost and an estimated fair value of $78.9 million and $60.9 million , respectively as well as four securities below investment grade with an amortized cost and an estimated fair value of $0.4 million and $0.0 million , respectively.

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OTTI and Watch List

We have a policy and process in place to identify securities in our investment portfolio each quarter for which we should recognize impairments.

At each balance sheet date, we identify invested assets which have characteristics that create uncertainty as to our future assessment of an OTTI (i.e. significant unrealized losses compared to amortized cost and industry trends). As part of this assessment, we review not only a change in current price relative to the asset's amortized cost, but also the issuer’s current credit rating and the probability of full recovery of principal based upon the issuer’s financial strength. Specifically, for corporate issues, we evaluate the financial stability and quality of asset coverage for the securities relative to the term to maturity for the issues we own. On a quarterly basis, we review structured securities for changes in default rates, loss severities and expected cash flows for the purpose of assessing potential OTTI and related credit losses to be recognized in operations. A security which has a 20% or greater change in market price relative to its amortized cost and a possibility of a loss of principal will be included on a list which is referred to as our watch list. At December 31, 2013 and September 30, 2013 , our watch list included only twenty and fourteen securities, respectively, in an unrealized loss position with an amortized cost of $102.2 million and $79.3 million, unrealized losses of $ 25.0 million and $18.4 million, and a fair value of $ 77.2 million and $60.9 million, respectively. Our analysis of these securities, which included cash flow testing results, demonstrated the December 31, 2013 and September 30, 2013 carrying values were fully recoverable.

There were nine and six structured securities on the watch list to which we had potential credit exposure as of December 31, 2013 and September 30, 2013 , respectively. Our analysis of these structured securities, which included cash flow testing results, demonstrated the December 31, 2013 and September 30, 2013 carrying values were fully recoverable.

Exposure to European Sovereign Debt

Our investment portfolio had no direct exposure to European sovereign debt as of December 31, 2013 or September 30, 2013 .

Available-For-Sale Securities

For additional information regarding our AFS securities, including the amortized cost, gross unrealized gains (losses), and fair value of AFS securities as well as the amortized cost and fair value of fixed maturity AFS securities by contractual maturities as of December 31, 2013 , refer to Note 4 , to our unaudited Condensed Consolidated Financial Statements .

Net Investment Income and Net Investment Gains

For discussion regarding our net investment income and net investment gains refer to Note 4 to our unaudited Condensed Consolidated Financial Statements .

Concentrations of Financial Instruments

For detail regarding our concentration of financial instruments refer to Note 3 to our unaudited Condensed Consolidated Financial Statements .

Derivatives

We are exposed to credit loss in the event of nonperformance by our counterparties on call options. We attempt to reduce this credit risk by purchasing such options from large, well-established financial institutions.

We also hold cash and cash equivalents received from counterparties for call option collateral, as well as U.S. Government securities pledged as call option collateral, if our counterparty’s net exposures exceed pre-determined thresholds. See Note 5 to our unaudited Condensed Consolidated Financial Statements for additional information regarding our derivatives and our exposure to credit loss on call options.

Liquidity and Capital Resources

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Discussion of Consolidated Cash Flows

Summary of Consolidated Cash Flows

Presented below is a table that summarizes the cash provided or used in our activities and the amount of the respective increases or decreases in cash provided or used from those activities between the fiscal periods (in millions):



	Fiscal Quarter						Increase / (Decrease)
Cash provided by (used in):	2014			2013			2014 compared to 2013

Operating activities	$	38.0		$	72.2		$	(34.2	)
Investing activities	(938.1		)	(514.6		)	(423.5		)
Financing activities	455.2			(5.3		)	460.5
Net increase in cash and cash equivalents	$	(444.9	)	$	(447.7	)	$	2.8

Operating Activities

Cash provided by operating activities totaled $38.0 million for the Fiscal 2014 Quarter as compared to cash provided by operating activities of $72.2 million for the Fiscal 2013 Quarter . The $34.2 million decline was principally due to a $39.3 million decrease in funds withheld from reinsurers.

Investing Activities

Cash used in investing activities was $938.1 million for the Fiscal 2014 Quarter , as compared to cash used in investing activities of $514.6 million for the Fiscal 2013 Quarter . The $423.5 million increase in cash used in investing activities is principally due to a $480.2 million increase in purchases of fixed maturity securities and other investments, net of cash proceeds from sales, maturities and repayments.

Financing Activities

Cash provided by financing activities was $455.2 million for Fiscal 2014 Quarter compared to cash used in financing activities of $5.3 million for Fiscal 2013 Quarter . The $460.5 million increase in cash provided by financing activities was primarily related to the receipt of $175.9 million of net cash proceeds from the issuance of common stock in connection with our IPO, an increase in cash provided by $306.5 million from the issuance of investment contracts and pending new production, including annuity and universal life insurance contracts, net of redemptions and benefit payments. These increases were partially offset by a $23.0 million increase in dividends paid to our parent company, HGI, quarter over quarter.

Off-Balance Sheet Arrangements

Throughout our history, we have entered into indemnifications in the ordinary course of business with our customers, suppliers, service providers, business partners and in certain instances, when we sold businesses. Additionally, we have indemnified our directors and officers who are, or were, serving at our request in such capacities. Although the specific terms or number of such arrangements is not precisely known due to the extensive history of our past operations, costs incurred to settle claims related to these indemnifications have not been material to our financial statements. We have no reason to believe that future costs to settle claims related to our former operations will have a material impact on our financial position, results of operations or cash flows.

The F&G Stock Purchase Agreement between HFG and OMGUK includes a Guarantee and Pledge Agreement which creates certain obligations for FGLH as a grantor and also grants a security interest to OMGUK of FGLH’s equity interest in FGL Insurance in the event that HFG fails to perform in accordance with the terms of the F&G Stock Purchase Agreement. We are not aware of any events or transactions that resulted in non-compliance with the Guarantee and Pledge Agreement.

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Critical Accounting Policies and Estimates

The preparation of our financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Actual results could differ materially from those estimates. There have been no material changes to the critical accounting policies and estimates as discussed in our Registration Statement on Form S-1 as amended (File No. 333-190880) which can be found at the SEC's website www.sec.gov.

Recent Accounting Pronouncements

Offsetting Assets and Liabilities

In December 2011, the FASB issued amended disclosure requirements for offsetting financial assets and financial liabilities to allow investors to better compare financial statements prepared under US GAAP with financial statements prepared under International Financial Reporting Standards. The new standards are effective for the Company beginning in the first quarter of its fiscal year ending September 30, 2014. ASU 2011-11 was adopted by the Company effective October 1, 2013. FGL does not offset any of its derivative transactions, including bifurcated embedded derivatives, in its statement of financial position. The Company only enters into purchased equity option and long futures contracts transactions. The Company has not entered into any repurchase and reverse repurchase agreements or securities borrowing and lending transactions. Accordingly, no additional disclosures are required.

Investments in Qualified Affordable Housing Projects

In January 2014, the FASB issued amended guidance which allows investors in Low Income Housing Tax Credit (“LIHTC”) programs that meet specified conditions to present the net tax benefits (net of the amortization of the cost of the investment) within income tax expense. The cost of the investments that meet the specified conditions will be amortized in proportion to (and over the same period as) the total expected tax benefits, including the tax credits and other tax benefits, as they are realized on the tax return. The guidance is required to be applied retrospectively, if investors elect the proportional amortization method. However, if investors have existing LIHTC investments accounted for under the effective-yield method at adoption, they may continue to apply that method for those existing investments. The new standards are effective for the Company beginning in the first quarter of its fiscal year ending September 30, 2016. The Company is currently evaluating the impact of this new accounting guidance on its consolidated financial position and results of operations.

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Item 3.	Quantitative and Qualitative Disclosures about Market Risk

Market Risk Factors

Market risk is the risk of the loss of fair value resulting from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates, commodity prices and equity prices. Market risk is directly influenced by the volatility and liquidity in the markets in which the related underlying financial instruments are traded. We have significant holdings in financial instruments and are naturally exposed to a variety of market risks. We are primarily exposed to interest rate risk and equity price risk and have some exposure to credit risk and counterparty risk, which affect the fair value of financial instruments subject to market risk.

Enterprise Risk Management

We place a high priority to risk management and risk control. As part of our effort to ensure measured risk taking, management has integrated risk management in our daily business activities and strategic planning. We have comprehensive risk management, governance and control procedures in place and have established a dedicated risk management function with responsibility for the formulation of our risk appetite, strategies, policies and limits. The risk management function is also responsible for monitoring our overall market risk exposures and provides review, oversight and support functions on risk-related issues. Our risk appetite is aligned with how our businesses are managed and how we anticipate future regulatory developments.

Our risk governance and control systems enable us to identify, control, monitor and aggregate risks and provide assurance that risks are being measured, monitored and reported adequately and effectively in accordance with the following three principles:


•	Management of the business has primary responsibility for the day-to-day management of risk.


•	The risk management function has the primary responsibility to align risk taking with strategic planning through risk tolerance and limit setting.


•	The internal audit function provides an ongoing independent (i.e. outside of the risk organization) and objective assessment of the effectiveness of internal controls, including financial and operational risk

management.

The Chief Risk Officer (“CRO”) heads our risk management process and reports directly to our Chief Executive Officer (“CEO”). Our Enterprise Risk Committee discusses and approves all risk policies and reviews and approves risks associated with our activities. This includes volatility (affecting earnings and value), exposure (required capital and market risk) and insurance risks.

We have implemented several limit structures to manage risk. Examples include, but are not limited to, the following:


•	At-risk limits on sensitivities of earnings and regulatory capital to the capital markets provide the fundamental framework to manage capital markets risks including the risk of asset / liability mismatch;


•	Duration and convexity mismatch limits;


•	Credit risk concentration limits; and


•	Investment and derivative guidelines.

We manage our risk appetite based on two key risk metrics:

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•	Regulatory Capital Sensitivities: the potential reduction, under a moderate capital markets stress scenario, of the excess of available statutory capital above the minimum required under the NAIC regulatory RBC methodology; and


•	Earnings Sensitivities: the potential reduction in results of operations under a moderate capital markets stress scenario. Maintaining a consistent level of earnings helps us to finance our operations, support our capital requirements and provide funds to pay dividends to stockholders.

Our risk metrics cover the most important aspects in terms of performance measures where risk can materialize and are representative of the regulatory constraints to which our business is subject. The sensitivities for earnings and statutory capital are important metrics since they provide insight into the level of risk we take under stress scenarios. They also are the basis for internal risk management.

We are also subject to cash flow stress testing pursuant to regulatory requirements. This analysis measures the effect of changes in interest rate assumptions on asset and liability cash flows. The analysis includes the effects of:


•	The timing and amount of redemptions and prepayments in our asset portfolio;


•	Our derivative portfolio;


•	Death benefits and other claims payable under the terms of our insurance products;


•	Lapses and surrenders in our insurance products;


•	Minimum interest guarantees in our insurance products; and


•	Book value guarantees in our insurance products.

Interest Rate Risk

Interest rate risk is our primary market risk exposure. We define interest rate risk as the risk of an economic loss due to adverse changes in interest rates. This risk arises from our holdings in interest sensitive assets and liabilities, primarily as a result of investing life insurance premiums and fixed annuity deposits received in interest-sensitive assets and carrying these funds as interest-sensitive liabilities. Substantial and sustained increases or decreases in market interest rates can affect the profitability of the insurance products and the fair value of our investments, as the majority of our insurance liabilities are backed by fixed maturity securities.

The profitability of most of our products depends on the spreads between interest yield on investments and rates credited on insurance liabilities. We have the ability to adjust the rates credited, primarily caps and credit rates, on the majority of the annuity liabilities at least annually, subject to minimum guaranteed values. In addition, the majority of the annuity products have surrender and withdrawal penalty provisions designed to encourage persistency and to help ensure targeted spreads are earned. However, competitive factors, including the impact of the level of surrenders and withdrawals, may limit our ability to adjust or maintain crediting rates at the levels necessary to avoid a narrowing of spreads under certain market conditions.

In order to meet our policy and contractual obligations, we must earn a sufficient return on our invested assets. Significant changes in interest rates exposes us to the risk of not earning the anticipated spreads between the interest rate earned on our investments and the credited interest rates paid on outstanding policies and contracts. Both rising and declining interest rates can negatively affect interest earnings, spread income and the attractiveness of certain of our products.

During periods of increasing interest rates, we may offer higher crediting rates on interest-sensitive products, such as IUL insurance and fixed annuities, and we may increase crediting rates on in-force products to keep these products competitive. A rise in interest rates, in the absence of other countervailing changes, will result in a decline in the market value of our investment portfolio.

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As part of our ALM program, we have made a significant effort to identify the assets appropriate to different product lines and ensure investing strategies match the profile of these liabilities. Our ALM strategy is designed to align the expected cash flows from the investment portfolio with the expected liability cash flows. As such, a major component of our effort to manage interest rate risk has been to structure the investment portfolio with cash flow characteristics that are consistent with the cash flow characteristics of the insurance liabilities. We use actuarial models to simulate the cash flows expected from the existing business under various interest rate scenarios. These simulations enable us to measure the potential gain or loss in the fair value of interest rate-sensitive financial instruments, to evaluate the adequacy of expected cash flows from assets to meet the expected cash requirements of the liabilities and to determine if it is necessary to lengthen or shorten the average life and duration of our investment portfolio. The “duration” of a security is the time weighted present value of the security’s expected cash flows. Duration is used to measure a security’s sensitivity to changes in interest rates. When the durations of assets and liabilities are similar, exposure to interest rate risk is minimized because a change in the value of assets could be expected to be largely offset by a change in the value of liabilities.

Credit Risk and Counterparty Risk

We are exposed to the risk that a counterparty will default on its contractual obligation resulting in financial loss. The major source of credit risk arises predominantly in our insurance operations’ portfolios of debt and similar securities. The carrying value of our fixed maturity portfolio totaled $16.3 billion and $15.5 billion at December 31, 2013 and September 30, 2013 , respectively. Our credit risk materializes primarily as impairment losses. We are exposed to occasional cyclical economic downturns, during which impairment losses may be significantly higher than the long-term historical average. This is offset by years where we expect the actual impairment losses to be substantially lower than the long-term average. Credit risk in the portfolio can also materialize as increased capital requirements as assets migrate into lower credit qualities over time. The effect of rating migration on our capital requirements is also dependent on the economic cycle and increased asset impairment levels may go hand in hand with increased asset related capital requirements.

We manage the risk of default and rating migration by applying disciplined credit evaluation and underwriting standards and limiting allocations to lower quality, higher risk investments. In addition, we diversify our exposure by issuer and country, using rating based issuer and country limits. We also set investment constraints that limit our exposure by industry segment. To limit the impact that credit risk can have on earnings and capital adequacy levels, we have portfolio-level credit risk constraints in place. Limit compliance is monitored on a daily or, in some cases, monthly basis.

In connection with the use of call options, we are exposed to counterparty credit risk-the risk that a counterparty fails to perform under the terms of the derivative contract. We have adopted a policy of only dealing with credit worthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the financial loss from defaults. The exposure and credit rating of the counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst seven different approved counterparties to limit the concentration in one counterparty. Our policy allows for the purchase of derivative instruments from nationally recognized investment banking institutions with the equivalent of an S&P rating of A- or higher. Collateral support documents are negotiated to further reduce the exposure when deemed necessary. See Note 5 to our unaudited Condensed Consolidated Financial Statements for additional information regarding our exposure to credit loss.

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Information regarding the Company's exposure to credit loss on the call options it holds is presented in the following table:



		December 31, 2013								September 30, 2013
Counterparty	Credit Rating (Moody's/S&P) (a)	Notional Amount		Fair Value		Collateral		Net Credit Risk		Notional Amount		Fair Value		Collateral		Net Credit Risk
Merrill Lynch	NA/A	$	2,157.9	$	99.6	$	45.1	$	54.5	$	2,037.8	$	70.7	$	—	$	70.7
Deutsche Bank	A2/A	1,706.8		70.4		—		70.4		1,620.4		51.7		23.0		28.7
Morgan Stanley	A3/A	2,379.0		103.1		74.7		28.4		2,264.1		75.7		49.0		26.7
Royal Bank of Scotland	A3/A	245.3		16.9		—		16.9		364.3		20.3		—		20.3
Barclay's Bank	A2/A	117.8		4.1		—		4.1		120.8		3.4		—		3.4
		$	6,606.8	$	294.1	$	119.8	$	174.3	$	6,407.4	$	221.8	$	72.0	$	149.8

(a) Credit rating as of December 31, 2013.

We also have credit risk related to the ability of reinsurance counterparties to honor their obligations to pay the contract amounts under various agreements. To minimize the risk of credit loss on such contracts, we diversify our exposures among many reinsurers and limit the amount of exposure to each based on credit rating. We also generally limit our selection of counterparties with which we do new transactions to those with an “A-” credit rating or above or that are appropriately collateralized and provide credit for reinsurance. When exceptions are made to that principle, we ensure that we obtain collateral to mitigate our risk of loss.

In the normal course of business, certain reinsurance recoverables are subject to reviews by the reinsurers. We are not aware of any material disputes arising from these reviews or other communications with the counterparties, and, therefore, as of December 31, 2013 , no allowance for uncollectible amounts was recorded.

Equity Price Risk

We are primarily exposed to equity price risk through certain insurance products, specifically those products with guaranteed minimum withdrawal benefits. We offer a variety of FIA contracts with crediting strategies linked to the performance of indices such as the S&P 500 Index, Dow Jones Industrials or the NASDAQ 100 Index. The estimated cost of providing guaranteed minimum withdrawal benefits incorporates various assumptions about the overall performance of equity markets over certain time periods. Periods of significant and sustained downturns in equity markets, increased equity volatility or reduced interest rates could result in an increase in the valuation of the future policy benefit or policyholder account balance liabilities associated with such products, resulting in a reduction in our net income. The rate of amortization of intangibles related to FIA products and the cost of providing guaranteed minimum withdrawal benefits could also increase if equity market performance is worse than assumed.

To economically hedge the equity returns on these products, we purchase derivatives to hedge the FIA equity exposure. The primary way we hedge FIA equity exposure is to purchase over the counter equity index call options from broker-dealer derivative counterparties who generally have a minimum credit rating of Baa2 from Moody’s and A- from S&P. The second way to hedge FIA equity exposure is by purchasing exchange traded equity index futures contracts. Our hedging strategy enables us to reduce our overall hedging costs and achieve a high correlation of returns on the call options purchased relative to the index credits earned by the FIA contractholders. The majority of the call options are one-year options purchased to match the funding requirements underlying the FIA contracts. These hedge programs are limited to the current policy term of the FIA contracts, based on current participation rates. Future returns, which may be reflected in FIA contracts’ credited rates beyond the current policy term, are not hedged. We attempt to manage the costs of these purchases through the terms of our FIA contracts,

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which permit us to change caps or participation rates, subject to certain guaranteed minimums that must be maintained.

The derivatives are used to fund the FIA contract index credits and the cost of the call options purchased is treated as a component of spread earnings. While the FIA hedging program does not explicitly hedge statutory or US GAAP income volatility, the FIA hedging program tends to mitigate a significant portion of the statutory and US GAAP reserve changes associated with movements in the equity market and risk-free rates. This is due to the fact that a key component in the calculation of statutory and US GAAP reserves is the market valuation of the current term embedded derivative. Due to the alignment of the embedded derivative reserve component with hedging of this same embedded derivative, there should be a reasonable match between changes in this component of the reserve and changes in the assets backing this component of the reserve. However, there may be an interim mismatch due to the fact that the hedges which are put in place are only intended to cover exposures expected to remain until the end of an indexing term. To the extent index credits earned by the contractholder exceed the proceeds from option expirations and futures income, we incur a raw hedging loss.

See Note 5 to our unaudited Condensed Consolidated Financial Statements for additional details on the derivatives portfolio.

Fair value changes associated with these investments are intended to, but do not always, substantially offset the increase or decrease in the amounts added to policyholder account balances for index products. For the Fiscal Quarter , the annual index credits to policyholders on their anniversaries were $96.3 million. Proceeds received at expiration on options related to such credits were $91.0 million. The shortfall is funded by our net investment spread earnings and futures income.

Other market exposures are hedged periodically depending on market conditions and our risk tolerance. The FIA hedging strategy economically hedges the equity returns and exposes us to the risk that unhedged market exposures result in divergence between changes in the fair value of the liabilities and the hedging assets. We use a variety of techniques including direct estimation of market sensitivities and value-at-risk to monitor this risk daily. We intend to continue to adjust the hedging strategy as market conditions and risk tolerance change.

Sensitivity Analysis

The analysis below is hypothetical and should not be considered a projection of future risks. Earnings projections are before tax and noncontrolling interest.

Interest Rate Risk

We assess interest rate exposures for financial assets, liabilities and derivatives using hypothetical test scenarios that assume either increasing or decreasing 100 basis point parallel shifts in the yield curve, reflecting changes in either credit spreads or risk-free rates. If interest rates were to increase 100 basis points from levels at December 31, 2013 , the estimated fair value of our fixed maturity securities would decrease by approximately $856.4 million of which $56.3 million relates to the Front Street funds withheld assets. The fair values of the reinsurance related embedded derivative would increase by the amount of the Front Street funds withheld assets and be reflected in the Company’s Condensed Consolidated Statement of Operations. The impact on shareholders’ equity of such decrease, net of income taxes and intangibles adjustments, and the change in reinsurance related derivative would be a decrease of $211.1 million in AOCI and an decrease of $185.6 million in total shareholders’ equity. If interest rates were to decrease by 100 basis points from levels at December 31, 2013 , the estimated impact on the embedded derivative liability of such a decrease would be an increase of $101.0 million. The actuarial models used to estimate the impact of a one percentage point change in market interest rates incorporate numerous assumptions, require significant estimates and assume an immediate and parallel change in interest rates without any management of the investment portfolio in reaction to such change. Consequently, potential changes in value of financial instruments indicated by these simulations will likely be different from the actual changes experienced under given interest rate scenarios, and the differences may be material. Because we actively manage our investments and liabilities, the net exposure to interest rates can vary over time. However, any such decreases in the fair value of fixed maturity securities, unless related to credit concerns of the issuer requiring recognition of an OTTI, would generally be realized only if we were required to sell such securities at losses prior to their maturity to meet liquidity needs. Our liquidity needs are managed using the surrender and withdrawal provisions of the annuity contracts and through other means.

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Equity Price Risk

Assuming all other factors are constant, we estimate that a decline in equity market prices of 10% would cause the market value of our equity investments to decrease by approximately $28.7 million, our derivative investments to decrease by approximately $63.8 million based on equity positions and our FIA embedded derivative liability to decrease by approximately $30.8 million as of December 31, 2013 . Because our equity investments are classified as AFS, the 10% decline would not affect current earnings except to the extent that it reflects OTTI. These scenarios consider only the direct effect on fair value of declines in equity market levels and not changes in asset-based fees recognized as revenue, or changes in our estimates of total gross profits used as a basis for amortizing DAC and VOBA.


Item 4.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of the end of the period covered by this report. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that, as of December 31, 2013 , the Company’s disclosure controls and procedures were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

There has not been any change in the Company's internal controls over financial reporting that occurred during the quarter ended December 31, 2013 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II. OTHER INFORMATION

Special Note Regarding Forward-Looking Statements

This quarterly report includes forward-looking statements. Some of the forward-looking statements can be identified by the use of terms such as “believes”, “expects”, “may”, “will”, “should”, “could”, “seeks”, “intends”, “plans”, “estimates”, “anticipates” or other comparable terms. However, not all forward-looking statements contain these identifying words. These forward-looking statements include all matters that are not related to present facts or current conditions or that are not historical facts. They appear in a number of places throughout this report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our consolidated results of operations, financial condition, liquidity, prospects and growth strategies and the industries in which we operate and including, without limitation, statements relating to our future performance.

Forward-looking statements are subject to known and unknown risks and uncertainties, many of which are beyond our control. We caution you that forward-looking statements are not guarantees of future performance and that our actual consolidated results of operations, financial condition and liquidity, and industry development may differ materially from those made in or suggested by the forward-looking statements contained in this report. In addition, even if our consolidated results of operations, financial condition and liquidity, and industry development are consistent with the forward-looking statements contained in this report, those results or developments may not be indicative of results or developments in subsequent periods. A number of important factors could cause actual results to differ materially from those contained in or implied by the forward-looking statements, including the risks and uncertainties discussed in “Risk Factors” included in our Registration Statement on form S-1, as amended (File No. 333-190880), which can be found at the SEC’s website, www.sec.gov. Factors that could cause actual results to differ from those reflected in forward-looking statements relating to our operations and business include:


•	the accuracy of management’s assumptions and estimates;


•	the accuracy of our assumptions regarding the fair value and future performance of our investments;


•	our and our insurance subsidiaries’ ability to maintain or improve financial strength ratings;


•	our and our insurance subsidiaries’ potential need for additional capital to maintain our and their financial strength and credit ratings and meet other requirements and obligations;


•	the stock of our primary operating subsidiary is subject to the security interest of its former owner;


•	our ability to manage our business in a highly regulated industry, which is subject to numerous legal restrictions and regulations;

•

regulatory changes or actions, including those relating to regulation of financial services affecting (among other things) underwriting of insurance products and regulation of the sale, underwriting and pricing of products and minimum capitalization and statutory reserve requirements for insurance companies, or the ability of our insurance subsidiaries to make cash distributions to us (including dividends or payments on surplus notes those subsidiaries issue to us);


•	the impact of our reinsurers failing to meet or timely meet their assumed obligations, increasing their rates, or becoming subject to adverse developments that could materially adversely impact their ability to provide reinsurance to us at consistent and economical terms;


•	restrictions on our ability to use captive reinsurers;


•	being forced to sell investments at a loss to cover policyholder withdrawals;


•	the impact of interest rate fluctuations;


•	the availability of credit or other financings and the impact of equity and credit market volatility and disruptions on both our ability to obtain capital and the value and liquidity of our investments;


•	changes in the federal income tax laws and regulations which may affect the relative income tax advantages of our products;


•	increases in our valuation allowance against our deferred tax assets, and restrictions on our ability to fully utilize such assets;


•	being the target or subject of, and our ability to defend ourselves against or respond to, litigation (including class action litigation), enforcement investigations or regulatory scrutiny;


•	the performance of third parties including distributors, underwriters, actuarial consultants and other service providers;


•	the loss of key personnel;

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•	interruption or other operational failures in telecommunication, information technology and other operational systems, or a failure to maintain the security, integrity, confidentiality or privacy of sensitive data residing on such systems;


•	the continued availability of capital required for our insurance subsidiaries to grow;


•	the impact on our business of new accounting rules or changes to existing accounting rules;


•	our risk management policies and procedures could leave us exposed to unidentified or unanticipated risk;


•	general economic conditions and other factors, including prevailing interest and unemployment rate levels and stock and credit market performance which may affect (among other things) our ability to sell our products and the fair value of our investments, which could result in impairments and OTTI, and certain liabilities, and the lapse rate and profitability of policies;


•	our ability to protect our intellectual property;


•	difficulties arising from outsourcing relationships;


•	the impact on our business of man-made catastrophes, pandemics, and malicious and terrorist acts;


•	our ability to compete in a highly competitive industry and maintain competitive unit costs;


•	adverse consequences if the independent contractor status of our IMOs is successfully challenged;


•	our ability to attract and retain national marketing organizations and independent agents;


•	adverse tax consequences if we generate passive income in excess of operating expenses;


•	significant operating and financial restrictions, which may prevent us from capitalizing on business opportunities;


•	the inability of our subsidiaries and affiliates to generate sufficient cash to service all of their obligations;


•	our subsidiaries’ ability to pay dividends to us;


•	the ability to maintain or obtain approval of the IID and other regulatory authorities as required for our operations and those of our insurance subsidiaries; and


•	the other factors discussed in “Risk Factors”, of our Registration Statement on form S-1, as amended (File No. 333-190880).

You should read this report completely and with the understanding that actual future results may be materially different from expectations. All forward looking statements made in this report are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this report and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data.

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Item 1.	Legal Proceedings

See Note 12 to the Company’s Condensed Consolidated Financial Statements included in Part I—Item 1. Financial Statements. There were no material developments relating to the matters discussed therein during the fiscal quarter ended December 31, 2013 .


Item 1A.	Risk Factors

A detailed discussion of our risk factors can be found in our Registration Statement on Form S-1, as amended (File No.333-190880), which can be found at the SEC’s website www.sec.gov . There have been no material changes to the risk factors disclosed in our Registration Statement.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Use of proceeds

a) Sales of Unregistered Securities

On December 12, 2013, certain members of our board of directors acquired an aggregate of 40,284 shares of common stock in lieu of cash compensation for their board in a transaction exempt from registration under Rule 701 promulgated under the Securities Act of 1933, as amended.

On December 12, 2013, members of our compensation committee were granted an aggregate of 11,250 restricted shares of common stock and options to purchase 10,224 shares common stock at an exercise price of $17.00 per share and acquired an aggregate of 18,038 additional shares of common stock in lieu of cash compensation for their board service in transactions exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

b) Use of Proceeds from Public Offering of Common Stock

Our initial public offering of common stock was effected through a Registration Statement on Form S-1 (File No. 333-190880) that was declared effective by the Securities and Exchange Commission on December 12, 2013. Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC and Jeffries LLC acted as the representatives for the underwriters. The Registration Statement registered 9,750,000 shares of common stock and an additional 1,462,500 shares of common stock for sale upon the exercise of the underwriters’ over-allotment option. On December 18, 2013, 11,212,500 shares of common stock were sold at an initial public offering price of $17.00 per share, for aggregate gross proceeds of approximately $190.6 million to the Company. Our net proceeds of approximately $173.0 million from the initial public offering is comprised of gross proceeds from shares we issued in the initial public offering of approximately $190.6 million, offset by underwriting discounts and commissions of approximately $12.8 million and aggregate offering costs of approximately $4.8 million.

On December 18, 2013, a portion of the proceeds from the initial public offering was used to pay a special dividend to HGI of approximately $43.0 million. As described in our Registration Statement under the heading “Use of Proceeds,” we anticipate that we will use the remaining net proceeds from the initial public offering for working capital to support the growth of our business and other general corporate purposes, including the costs associated with being a public company. There has been no material change in the planned use of proceeds from our initial public offering from that described in our final prospectus filed with the Securities and Exchange Commission on December 13, 2013.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

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Item 5.	Other Information

None.

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Item 6.	Exhibits



Exhibit No.		Description of Exhibits

3.1		Amended and Restated Certificate of Incorporation of Fidelity & Guaranty Life (incorporated by reference to our Registration Statement on Form S-8, filed on December 13, 2013 (File No. 333-192849)).
3.2		Amended and Restated Bylaws of Fidelity & Guaranty Life (incorporated by reference to our Registration Statement on Form S-8, filed on December 13, 2013 (File No. 333-192849)).
4.1		Reference is made to Exhibits 3.1 and 3.2.
4.2		Form of Common Stock Certificate (incorporated by reference to our Registration Statement on Form S-1/A, filed on December 3, 2013 (File No. 333-192849)).
4.3		Indenture, dated March 27, 2013, among Fidelity & Guaranty Life Holdings, Inc., as issuer, the Subsidiary Guarantors from time to time parties thereto and Wells Fargo Bank, National Association, as trustee, relating to the 6.375% Senior Notes due 2021 (incorporated by reference to our Registration Statement on Form S-1/A, filed on October 17, 2013 (File No. 333-192849)).
4.4		First Supplemental Indenture, dated March 27, 2013, among Fidelity & Guaranty Life Holdings, Inc., as issuer, the Subsidiary Guarantors from named therein and Wells Fargo Bank, National Association, relating to the 6.375% Senior Notes due 2021 (incorporated by reference to our Registration Statement on Form S-1/A, filed on October 17, 2013 (File No. 333-192849)).
4.5*		Registration Rights Agreement, dated December 18, 2013, between Fidelity & Guaranty Life, and Harbinger Group, Inc.
10.1		Employment Agreement, dated January 27, 2014, between Dennis Vigneau and Fidelity & Guaranty Life Business Services, Inc. (incorporated by reference to our Current Report on Form 8-K, filed on January 28, 2014 (File No. 001-36227)).
10.2		Consent to Change in Reporting Structure and Waiver of Good Reason, dated October 30, 2013, between Leland C. Launer, Jr. and Fidelity & Guaranty Life Business Services, Inc. (incorporated by reference to our Registration Statement on Form S-1/A, filed on November 22, 2013 (File No. 333-190880)).
10.3		Amended and Restated Employment Agreement, dated November 14, 2013, between Fidelity & Guaranty Life Business Services, Inc. and John P. O’Shaughnessy (incorporated by reference to our Registration Statement on Form S-1/A, filed on November 22, 2013 (File No. 333-190880)).
10.4		Employment Agreement, dated November 14, 2013, between Fidelity & Guaranty Life Business Services, Inc. and John Phelps (incorporated by reference to our Registration Statement on Form S-1/A, filed on November 22, 2013 (File No. 333-190880)).
10.5		Amended and Restated Employment Agreement, dated November 14, 2013, between Fidelity & Guaranty Life Business Services, Inc. and Rajesh Krishnan (incorporated by reference to our Registration Statement on Form S-1/A, filed on November 22, 2013 (File No. 333-190880)).
10.6		Employment Agreement, dated November 14, 2013, between Fidelity & Guaranty Life Business Services, Inc. and Wendy J.B. Young (incorporated by reference to our Registration Statement on Form S-1/A, filed on November 22, 2013 (File No. 333-190880)).
10.7		Form of Director Indemnification Agreement (incorporated by reference to our Registration Statement on Form S-1/A, filed on November 26, 2013 (File No. 333-190880))
10.8		Fidelity & Guaranty Life Employee Incentive Plan (incorporated by reference to our Registration Statement on Form S-1/A, filed on October 17, 2013 (File No. 333-190880))
10.9		Fidelity & Guaranty Life 2013 Stock Incentive Plan (incorporated by reference to our Registration Statement on Form S-1/A, filed on December 3, 2013 (File No. 333-190880))
10.10		Form of Fidelity & Guaranty Life 2013 Non-Statutory Stock Option Agreement (incorporated by reference to our Registration Statement on Form S-1/A, filed on November 26, 2013 (File No. 333-190880))
10.11		Form of Fidelity & Guaranty Life 2013 Restricted Stock Agreement (incorporated by reference to our Registration Statement on Form S-1/A, filed on November 26, 2013 (File No. 333-190880))

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10.12		Form of Fidelity & Guaranty Life Performance RSU Grant Agreement (incorporated by reference to our Registration Statement on Form S-1/A, filed on November 26, 2013 (File No. 333-190880))
10.13		Form of Second Amended and Restated Fidelity & Guaranty Life Holdings, Inc. Stock Incentive Plan (incorporated by reference to our Registration Statement on Form S-1/A, filed on December 3, 2013 (File No. 333-190880))
10.14		Form of Amendment No. 1 to the Fidelity & Guaranty Life Holdings, Inc. 2012 Dividend Equivalent Plan (incorporated by reference to our Registration Statement on Form S-1/A, filed on December 3, 2013 (File No. 333-190880))
10.15		Form of Amendment No. 1 to the Restricted Stock Agreement (incorporated by reference to our Registration Statement on Form S-1/A, filed on December 3, 2013 (File No. 333-190880))
10.16		Form of Amendment No. 2 to the Restricted Stock Agreement between Leland C. Launer, Jr. and Fidelity & Guaranty Life Holdings, Inc. (incorporated by reference to our Registration Statement on Form S-1/A, filed on December 3, 2013 (File No. 333-190880))
10.17*		Form of Fidelity & Guaranty Life 2013 Restricted Stock Agreement for Compensation Committee Members
10.18*		Form of Fidelity & Guaranty Life 2013 Non-Statutory Stock Option Agreement for Compensation Committee Members
10.19*		Form of Fidelity & Guaranty Life 2013 Unrestricted Stock Agreement
10.20*		Form of Fidelity & Guaranty Life 2013 Unrestricted Stock Agreement for Compensation Committee Members
31.1 *		Certification of Chief Executive Officer, pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 *		Certification of Chief Financial Officer, pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 *		Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 *		Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS *		XBRL Instance Document.

101.SCH *		XBRL Taxonomy Extension Schema.

101.CAL *		XBRL Taxonomy Extension Calculation Linkbase.

101.DEF *		XBRL Taxonomy Definition Linkbase.

101.LAB *		XBRL Taxonomy Extension Label Linkbase.

101.PRE *		XBRL Taxonomy Extension Presentation Linkbase.


*	Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		FIDELITY & GUARANTY LIFE (Registrant)

Dated:	February 7, 2014	By:	/s/ WENDY JB YOUNG
			Senior Vice President and Chief Financial Officer
			(on behalf of the Registrant and as Principal Financial Officer)

Exhibit 4.5

EXECUTION VERSION

REGISTRATION RIGHTS AGREEMENT

FIDELITY & GUARANTY LIFE

dated as of December 18, 2013

Table of Contents



			Page

1. Definitions.			1

2. Registration on Request.			3

3. Registration Procedures.			7

4. Indemnification.			13

5. Registration Expenses.			16

6. Rule 144			17

7. Miscellaneous.			17

REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT (as amended from time to time, this “ Agreement ”), dated as of December 18, 2013, by and among Fidelity & Guaranty Life, a Delaware corporation (the “ Company ”), and each of the stockholders of the Company whose name appears on the signature pages hereof and any Person who becomes a party hereto pursuant to Section 7(d) (such stockholders each referred to individually as a “ Stockholder ,” and collectively the “ Stockholders ”).

RECITALS

WHEREAS, the Company is undertaking an underwritten initial public offering (the “ IPO ”) of shares of its common stock, par value $0.01 per share; and

WHEREAS, in connection with, and effective upon, the date of completion of the IPO (the “ IPO Date ”), the Company and the Stockholders wish to set forth certain understandings between such parties, including with respect to registration rights.

NOW, THEREFORE, in consideration of the foregoing recitals and of the mutual promises hereinafter set forth, the parties hereto agree as follows:

AGREEMENT

1. Definitions . As used in this Agreement, the following capitalized terms shall have the following respective meanings:

“ Affiliate ” means, with respect to any Person (as defined below), any other Person directly or indirectly controlling, controlled by or under common control with, such Person.

“ Common Stock ” means the shares of common stock, par value $0.01 per share, of the Company including any shares of capital stock into which Common Stock may be converted (as a result of recapitalization, share exchange or similar event) or are issued with respect to Common Stock, including, without limitation, with respect to any stock split or stock dividend, or a successor security.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and any successor statute thereto and the rules and regulations of the SEC promulgated thereunder.

“ Holdback Period ” means, ( i ) with respect to an IPO, 180 days after and during the ten days before the IPO Date, ( ii ) with respect to any registered offering other than an IPO covered by this Agreement, 90 days after and during the ten days before the effective date of the related registration statement or, in the case of a takedown from a shelf registration statement, 90 days after the date of the prospectus supplement filed with the SEC in connection with such takedown and during such prior period (not to exceed ten days) as the Company has given reasonable written notice to the holder of Registrable Securities and ( iii ) such other period as may be determined by the Executive Committee of the Company’s board of directors.

“ Holder ” means each of the Stockholders, any other Person entitled to incidental or piggyback registration rights pursuant to an agreement with the Company and any direct or indirect transferee of a Stockholder who has acquired Registrable Securities from a Stockholder and who agrees in writing to be bound by the provisions of this Agreement.

“ NASD ” means the National Association of Securities Dealers, Inc.

“ Permitted Transferee ” means with respect to any Stockholder, an Affiliate of such Stockholder, including to any investment fund or other entity controlled or managed by, or under common control or management with, such Stockholder; provided , however , that any such transferee agrees in a writing in the form attached as Exhibit A hereto to be bound by and to comply with all applicable provisions of this Agreement; provided , further , however , that in no event shall any “portfolio company” (as such term is customarily used among institutional investors) of any Stockholder constitute a “Permitted Transferee”. Any Stockholder shall also be a Permitted Transferee of the Permitted Transferee of itself.

“ Person ” means any individual, partnership, joint venture, corporation, limited liability company, trust, unincorporated organization, government or any department or agency thereof or any other entity.

“ Prospectus ” means the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such prospectus.

“ Registrable Securities ” means any Common Stock or other equity securities held by a Holder. As to any particular Registrable Securities, once issued such securities shall cease to be Registrable Securities when ( i ) they are sold pursuant to an effective Registration Statement under the Securities Act, ( ii ) they are sold pursuant to Rule 144 or are eligible to be sold pursuant to Rule 144 without regard for the volume or manner of sale restrictions of that rule (or any similar provision then in force under the Securities Act), ( iii ) they shall have ceased to be outstanding or ( iv ) they have been sold in a private transaction in which the transferor’s rights under this Agreement are not assigned to the transferee of the securities. No Registrable Securities may be registered under more than one Registration Statement at any one time.

“ Registration Statement ” means any registration statement of the Company under the Securities Act which covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

“ Rule 144 ” means Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.

“ Securities Act ” means the Securities Act of 1933, as amended, and any successor statute thereto and the rules and regulations of the SEC promulgated thereunder.

“ SEC ” means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act or the Exchange Act.

2. Registration on Request .

(a) Request by the Demand Party . Subject to the following paragraphs of this Section 2(a), following an IPO, the Stockholders shall have the right to require the Company to register, pursuant to the terms of this Agreement, under and in accordance with the provisions of the Securities Act, the number of Registrable Securities of such Stockholder and their Affiliates requested to be so registered pursuant to the terms of this Agreement, in each case by delivering a written notice to the Company (any such written notice, a “ Demand Notice ” and any such registration, a “ Demand Registration ”); provided that the Company shall not be obligated to file a registration statement relating to any Demand Notice under this

Section 2(a) within a period of 180 days after the effective date of any other Registration Statement relating to any Demand Notice under this Section 2(a). Following receipt of a Demand Notice for a Demand Registration in accordance with this Section 2(a), the Company shall use its reasonable best efforts to file a Registration Statement as promptly as practicable and shall use its reasonable best efforts to cause such Registration Statement to be declared effective under the Securities Act as promptly as practicable after the filing thereof.

No Demand Registration shall be deemed to have occurred for purposes of the first sentence of the preceding paragraph if the Registration Statement relating thereto ( i ) does not become effective, ( ii ) is not maintained effective for the period required pursuant to this Section 2, or ( iii ) the offering of the Registrable Securities pursuant to such Registration Statement is subject to a stop order, injunction, or similar order or requirement of the SEC during such period.

Within two days after receipt by the Company of a Demand Notice in accordance with this Section 2(a), the Company shall give written notice of such Demand Notice to all other Holders of Registrable Securities and shall, subject to the provisions of Section 2(b) hereof, include in such registration all Registrable Securities with respect to which the Company received written requests for inclusion therein within two days after such Notice is given by the Company to such Holders.

All requests made pursuant to this Section 2 will specify the number of Registrable Securities to be registered and the intended methods of disposition thereof.

The Company shall be required to maintain the effectiveness of the Registration Statement with respect to any Demand Registration for a period of at least 180 days after the effective date thereof or such shorter period during which all Registrable Securities included in such Registration Statement have actually been sold; provided , however , that such period shall be extended for a period of time equal to the period the Holder of Registrable Securities refrains from selling any securities included in such Registration Statement at the request of the Company or an underwriter of the Company pursuant to the provisions of this Agreement.

(b) Priority on Demand Registration . If any of the Registrable Securities registered pursuant to a Demand Registration are to be sold in a firm commitment underwritten offering, and the managing underwriter or underwriters advise the Holders of such securities in writing that in its reasonable view the total number or dollar amount of Registrable Securities proposed to be sold in such offering (including, without limitation, securities proposed to be included by other Holders of securities entitled to include securities in such Registration Statement pursuant to incidental or piggyback registration rights) is such as to adversely affect the success of such offering, then there shall be included in such firm commitment underwritten offering the number or dollar amount of Registrable Securities that in the opinion of such managing underwriter can be sold without adversely affecting such offering, and such number of Registrable Securities shall be allocated as follows:

(i) first, among the Holders of Registrable Securities requesting such registration (whether pursuant to a Demand Notice or pursuant to incidental or piggyback registration rights) pro rata on the basis of the percentage of Registrable Securities owned by each such Holder relative to the number of Registrable Securities owned by all such Holders until, with respect to each Holder, all Registrable Securities requested for registration by such Holders have been included in such registration; and

(ii) second, the securities for which inclusion in such Demand Registration was requested by the Company.

(c) Cancellation of a Demand Registration . Holders of a majority of the Registrable Securities which are to be registered in a particular offering pursuant to this Section 2 shall have the right, prior to the effectiveness of the Registration Statement, to notify the Company that they have determined that the Registration Statement be abandoned or withdrawn, in which event the Company shall abandon or withdraw such Registration Statement. Any Holder of Registrable Securities who has elected to sell Registrable Securities in an underwritten offering pursuant to this Section 2 (including the Holder who delivered the Demand Notice of such registration) shall be permitted to withdraw from such registration by written notice to the Company if the price to the public at which the Registrable Securities are proposed to be sold will be less than 90% of the average closing price of the class of stock being sold in the offering during the 10 trading days preceding the date on which the Demand Notice of such offering was given pursuant to Section 2(a).

(d) Postponements in Requested Registrations . ( i ) If the Company shall at any time furnish to the Holders a certificate signed by its chairman of the board, chief executive officer, president or any other of its authorized officers stating that the filing of a Registration Statement with respect to Registrable Securities would require the disclosure of material information the disclosure of which would, in the good faith judgment of the board of directors of the Company, have a material adverse effect on the business, operations or prospects of the Company (including, without limitation, the ability to effect a material proposed acquisition, disposition, financing, reorganization, recapitalization or other transaction), the Company may postpone the filing (but not the preparation) of a Registration Statement required by this Section 2 for up to 45 days and ( ii ) if the Board of Directors of the Company determines in its good faith judgment, that the registration and offering otherwise required by this Section 2 would have an adverse effect on a then contemplated public offering of the Common Stock and if such registration and offering includes at least 90% of the Registrable Securities so requested to be included by the Stockholders, the Company may postpone the filing (but not the preparation) of a Registration Statement required by this Section 2, during the period starting with the 30th day immediately preceding the date of the anticipated filing of, and ending on a date 90 days (or such shorter period as the managing underwriter may permit) following the effective date of, the Registration Statement relating to such other public offering; provided that the Company shall at all times in good faith use its reasonable best efforts to cause any Registration Statement required by this Section 2 to be filed as soon as possible and; provided , further , that the Company shall not be permitted to postpone registration pursuant to this Section 2(d) more than once in any 360‑day period. The Company shall promptly give the Holders requesting registration thereof pursuant to this Section 2 written notice of any postponement made in accordance with the preceding sentence.

(e) Shelf-Take Downs . At any time that a shelf registration statement covering Registrable Securities pursuant to Section 2 is effective, if any Stockholder delivers a notice to the Company (a “ Take-Down Notice ”) (which shall be considered a registration upon request for purposes of Section 2(d)) stating that it intends to effect an underwritten offering of all or part of its Registrable Securities included by it on the shelf registration statement (a “ Shelf Underwritten Offering ”), then the Company shall amend or supplement the shelf registration statement as may be necessary in order to enable such Registrable Securities to be distributed pursuant to the Shelf Underwritten Offering (taking into account the inclusion of Registrable Securities by any other holders pursuant to Section 2(b)). In connection with any Shelf Underwritten Offering:

(i) the Company shall also deliver the Take-Down Notice to all other Holders included on such shelf registration statement within two days and permit each Holder to include its Registrable Securities included on the shelf registration statement in the Shelf Underwritten Offering if such Holder notifies the Company within two business days after delivery of the Take-Down Notice to such Holder; and

(ii) in the event that the underwriter advises such proposing Holder and the Company in writing that in its reasonable view the total number or dollar amount of Registrable Securities

proposed to be sold in such offering (including securities proposed to be included by other Holders of securities entitled to include securities in such take-down offering pursuant to Section 2(e)(i)) is such as to adversely affect the success of such offering, then the underwriter may limit the number of shares which would otherwise be included in such take-down offering in the same manner as described in Section 2(b) with respect to a limitation of shares to be included in a registration.

(f) Registration Statement Form . If any registration requested pursuant to this Section 2 which is proposed by the Company to be effected by the filing of a Registration Statement on Form S‑3 (or any successor or similar short-form registration statement) shall be in connection with an underwritten public offering, and if the managing underwriter shall advise the Company in writing that, in its reasonable opinion, the use of another form of Registration Statement is of material importance to the success of such proposed offering or is otherwise required by applicable law, then such registration shall be effected on such other form.

(g) Selection of Underwriters . The Company’s Executive Committee exclusively shall negotiate agreements with the underwriters with regard to holdback and lock-up arrangements. The Executive Committee exclusively also shall select the lead managing underwriter in all underwritten offerings of the Company, including those made pursuant to Section 2 hereof.

3. Registration Procedures . If and whenever the Company is required to use its reasonable best efforts to effect the registration of any Registrable Securities under the Securities Act as provided in Section 2 hereof, the Company shall effect such registration to permit the sale of such Registrable Securities in accordance with the intended method or methods of disposition thereof, and pursuant thereto the Company shall cooperate in the sale of the securities and shall, as expeditiously as possible:

(a) prepare and file, in each case as promptly as practicable, with the SEC a Registration Statement or Registration Statements on such form as shall be available for the sale of the Registrable Securities by the Holders thereof or by the Company in accordance with the intended method or methods of distribution thereof, and use its reasonable best efforts to cause such Registration Statement to become effective as soon as practicable and to remain effective as provided herein; provided , however , that before filing a Registration Statement or Prospectus or any amendments or supplements thereto (including documents that would be incorporated or deemed to be incorporated therein by reference), the Company shall furnish or otherwise make available to the Holders of the Registrable Securities covered by such Registration Statement, their counsel and the managing underwriters, if any, copies of all such documents proposed to be filed, which documents will be subject to the reasonable review and comment of such counsel, and such other documents reasonably requested by such counsel, including any comment letter from the SEC, and, if requested by such counsel, provide such counsel reasonable opportunity to participate in the preparation of such Registration Statement and each Prospectus included therein and such other opportunities to conduct a reasonable investigation within the meaning of the Securities Act, including reasonable access to the Company’s books and records, officers, accountants and other advisors. The Company shall not file any such Registration Statement or Prospectus or any amendments or supplements thereto (including such documents that, upon filing, would be incorporated or deemed to be incorporated by reference therein) with respect to a Demand Registration to which the Holders of a majority of the Registrable Securities covered by such Registration Statement (or their counsel) or the managing underwriters, if any, shall reasonably object, in writing, on a timely basis, unless, in the opinion of the Company, such filing is necessary to comply with applicable law;

(b) prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement continuously effective during the period provided herein and comply in all material respects with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement; and cause the related Prospectus to be supplemented by any Prospectus supplement as

may be necessary to comply with the provisions of the Securities Act with respect to the disposition of the securities covered by such Registration Statement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act;

(c) notify each selling Holder of Registrable Securities, its counsel and the managing underwriters, if any, promptly, and (if requested by any such Person) confirm such notice in writing, ( i ) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective, ( ii ) of any request by the SEC or any other federal or state governmental authority for amendments or supplements to a Registration Statement or related Prospectus or for additional information, ( iii ) of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, ( iv ) if at any time the Company has reason to believe that the representations and warranties of the Company contained in any agreement (including any underwriting agreement) contemplated by Section 3(m) below cease to be true and correct, ( v ) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, and ( vi ) of the happening of any event that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading (which notice shall notify the selling Holders only of the occurrence of such an event and shall provide no additional information regarding such event to the extent such information would constitute material non-public information);

(d) use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement, or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction at the earliest date reasonably practical;

(e) if requested by the managing underwriters, if any, or the Holders of a majority of the then issued and outstanding Registrable Securities being sold in connection with an underwritten offering, promptly include in a Prospectus supplement or post-effective amendment such information as the managing underwriters, if any, and such Holders may reasonably request in order to permit the intended method of distribution of such securities and make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received such request; provided , however , that the Company shall not be required to take any actions under this Section 3(e) that are not, in the opinion of counsel for the Company, in compliance with applicable law;

(f) deliver to each selling Holder of Registrable Securities, its counsel, and the underwriters, if any, without charge, as many copies of the Prospectus or Prospectuses (including each form of Prospectus) and each amendment or supplement thereto as such Persons may reasonably request from time to time in connection with the distribution of the Registrable Securities; and the Company, subject to the last paragraph of this Section 3, hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders of Registrable Securities and the underwriters, if any, in connection with the offering and sale of

the Registrable Securities covered by such Prospectus and any such amendment or supplement thereto;

(g) prior to any public offering of Registrable Securities, use its reasonable best efforts to register or qualify or cooperate with the selling Holders of Registrable Securities, the underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or “Blue Sky” laws of such jurisdictions within the United States as any seller or underwriter reasonably requests in writing and to keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and to take any other action that may be necessary or advisable to enable such Holders of Registrable Securities to consummate the disposition of such Registrable Securities in such jurisdiction; provided , however , that the Company will not be required to ( i ) qualify generally to do business in any jurisdiction where it is not then so required to qualify but for this paragraph (g) or ( ii ) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject;

(h) cooperate with the selling Holders of Registrable Securities and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates (not bearing any legends) representing Registrable Securities to be sold after receiving written representations from each Holder of such Registrable Securities that the Registrable Securities represented by the certificates so delivered by such Holder will be transferred in accordance with the Registration Statement, and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters, if any, or Holders may request at least two business days prior to any sale of Registrable Securities in a firm commitment public offering, but in any other such sale, within ten business days prior to having to issue the securities;

(i) use its reasonable best efforts to cause the Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities within the United States, except as may be required solely as a consequence of the nature of such selling Holder’s business, in which case the Company will cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals, as may be necessary to enable the seller or sellers thereof or the underwriters, if any, to consummate the disposition of such Registrable Securities;

(j) upon the occurrence of any event contemplated by Section 3(c)(vi) above, prepare a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;

(k) provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such Registration Statement from and after a date not later than the effective date of such Registration Statement;

(l) use its reasonable best efforts to cause all shares of Registrable Securities covered by such Registration Statement to be listed on a national securities exchange if shares of the particular class of Registrable Securities are at that time listed on such exchange, prior to the effectiveness of such Registration Statement (or, if such Registration is an initial public offering, use its reasonable best efforts to cause such Registrable Securities to be so listed within ten business days following the effectiveness of such Registration Statement);

(m) enter into such agreements (including an underwriting agreement in form, scope and substance as is customary in underwritten offerings) and take all such other actions reasonably requested by the Holders of a majority of the Registrable Securities being sold in connection therewith (including those reasonably requested by the managing underwriters, if any) to expedite or facilitate the disposition of such Registrable Securities, and in such connection, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration, ( i ) make such representations and warranties to the underwriters, if any, with respect to the business of the Company and its subsidiaries, and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings, and, if true, confirm the same if and when requested, ( ii ) use its reasonable best efforts to furnish to the underwriters, if any, opinions of outside counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any, addressed to each of the underwriters, if any, covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such underwriters, ( iii ) use its reasonable best efforts to obtain “cold comfort” letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement) who have certified the financial statements included in such Registration Statement, addressed to each of the underwriters, if any, such letters to be in customary form and covering matters of the type customarily covered in “cold comfort” letters in connection with underwritten offerings, ( iv ) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures substantially to the effect set forth in Section 4 hereof with respect to all parties to be indemnified pursuant to said Section except as otherwise agreed by the Stockholders and ( v ) deliver such documents and certificates as may be reasonably requested by the managing underwriters, if any, to evidence the continued validity of the representations and warranties made pursuant to Section 3(m)(i) above and to evidence compliance with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. The above shall be done at each closing under such underwriting or similar agreement, or as and to the extent required thereunder;

(n) make available for inspection by a representative of the selling Holders of Registrable Securities, any underwriter participating in any such disposition of Registrable Securities, if any, and any attorneys or accountants retained by such selling Holders or underwriter, at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and cause the officers, directors and employees of the Company and its subsidiaries to supply all information in each case reasonably requested by any such representative, underwriter, attorney or accountant in connection with such Registration Statement; provided , however , that any information that is not generally publicly available at the time of delivery of such information shall be kept confidential by such Persons unless ( i ) disclosure of such information is required by court or administrative order, ( ii ) disclosure of such information, in the opinion of counsel to such Person, is required by law or applicable legal process or ( iii ) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard by such Person. In the case of a proposed disclosure pursuant to (i) or (ii) above, such Person shall be required to give the Company written notice of the proposed disclosure prior to such disclosure and, if requested by the Company, assist the Company in seeking to prevent or limit the proposed disclosure. Without limiting the foregoing, no such information shall be used by such Person as

the basis for any market transactions in securities of the Company or its subsidiaries in violation of law;

(o) cause its officers to use their reasonable best efforts to support the marketing of the Registrable Securities covered by the Registration Statement (including, without limitation, participation in “road shows”);

(p) cooperate with each seller of Registrable Securities and each underwriter or agent participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the NASD; and

(q) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months beginning with the first day of the Company’s first full calendar quarter after the effective date of the Registration Statement, which earnings statement will satisfy the provisions of Section 11(a) of the U.S. Securities Act and Rule 158 thereunder.

The Company may require each Holder of Registrable Securities as to which any registration is being effected to furnish to the Company in writing such information required in connection with such registration regarding such seller and the distribution of such Registrable Securities as the Company may, from time to time, reasonably request in writing and the Company may exclude from such registration the Registrable Securities of any Holder who unreasonably fails to furnish such information within a reasonable time after receiving such request.

Each Holder of Registrable Securities agrees if such Holder has Registrable Securities covered by such Registration Statement that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi) hereof, such Holder will forthwith discontinue disposition of such Registrable Securities covered by such Registration Statement or Prospectus until such Holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(j) hereof, or until it is advised in writing by the Company that the use of the applicable Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus; provided , however , that the time periods under Section 2 with respect to the length of time that the effectiveness of a Registration Statement must be maintained shall automatically be extended by the amount of time the Holder is required to discontinue disposition of such securities.

4. Indemnification .

(a) Indemnification by the Company . The Company shall, without limitation as to time, indemnify and hold harmless, to the fullest extent permitted by law, each Holder of Registrable Securities whose Registrable Securities are covered by a Registration Statement or Prospectus, the officers, directors, partners, members, managers, shareholders, accountants, attorneys, agents and employees of each of them, each Person who controls each such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, partners, members, managers, shareholders, accountants, attorneys, agents and employees of each such controlling person, each underwriter, if any, and each Person who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) such underwriter (each such person being referred to herein as a “ Covered Person ”), from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, costs of preparation and reasonable attorneys’ fees and any legal or other fees or expenses incurred by such party in connection with any investigation or proceeding), expenses, judgments, fines, penalties, charges and amounts paid in settlement (collectively, “ Losses ”), as incurred, arising out of or based upon any untrue statement (or alleged untrue statement) of a material fact

contained in any Prospectus, offering circular, or other document (including any related Registration Statement, notification, or the like) incident to any such registration, qualification, or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each such Covered Person, for any legal and any other expenses reasonably incurred in connection with investigating and defending or settling any such Loss, provided that the Company will not be liable in any such case ( x ) to the extent that any such Loss arises out of or is based on any untrue statement or omission by such Covered Person or underwriter, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such Registration Statement, Prospectus, offering circular, or other document in reliance upon and in conformity with written information relating to such Holder furnished to the Company by such Covered Person for use therein or ( y ) if such untrue statement or omission is completely corrected in an amendment or supplement to the Prospectus prior to the time of sale and such Holder thereafter fails to deliver such Prospectus as so amended or supplemented prior to or concurrently with the sale of Registrable Securities to the person asserting such Loss after the Company had furnished such Holder with a sufficient number of copies of the same a reasonable time prior to the time of sale (and the delivery thereof within a reasonable time after delivery of such copies to the Holder would have resulted in no such Loss). It is agreed that the indemnity agreement contained in this Section 4(a) shall not apply to amounts paid in settlement of any such Loss or action if such settlement is effected without the consent of the Company.

(b) Indemnification by Holder of Registrable Securities . The Company may require, as a condition to including any Registrable Securities in any Registration Statement filed in accordance with Section 3 hereof, that the Company shall have received an undertaking reasonably satisfactory to it from the prospective seller of such Registrable Securities to indemnify, to the fullest extent permitted by law, severally and not jointly with any other Holders of Registrable Securities, the Company, its directors and officers and each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act) and all other prospective sellers, from and against all Losses arising out of or based on any untrue statement of a material fact contained in any such Registration Statement, Prospectus, offering circular, or other document, or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will (without limitation of the portions of this Section 4(b)) reimburse the Company, such directors, controlling persons and prospective sellers for any legal or any other expenses reasonably incurred in connection with investigating or defending any such Loss, in each case to the extent, but only to the extent, that such untrue statement or omission is made in such Registration Statement, Prospectus, offering circular, or other document in reliance upon and in conformity with written information relating to such Holder furnished to the Company by such Holder for inclusion in such Registration Statement, Prospectus, offering circular or other document; provided , however , that the obligations of such Holder hereunder shall not apply to amounts paid in settlement of any such Losses (or actions in respect thereof) if such settlement is effected without the consent of such Holder; and provided , further , that the liability of such Holder of Registrable Securities shall be limited to the net proceeds received by such selling Holder from the sale of Registrable Securities covered by such Registration Statement.

(c) Conduct of Indemnification Proceedings . If any Person shall be entitled to indemnity hereunder (an “ Indemnified Party ”), such Indemnified Party shall give prompt notice to the party from which such indemnity is sought (the “ Indemnifying Party ”) of any claim or of the commencement of any proceeding with respect to which such Indemnified Party seeks indemnification or contribution pursuant hereto; provided , however , that the delay or failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party from any obligation or liability except to the extent that the Indemnifying Party has been materially prejudiced by such delay or failure. The Indemnifying Party shall have the right, exercisable by giving written notice to an Indemnified Party promptly after the receipt of written notice from such Indemnified Party of such claim or proceeding, to, unless in the Indemnified Party’s reasonable

judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, assume, at the Indemnifying Party’s expense, the defense of any such claim or proceeding, with counsel reasonably satisfactory to such Indemnified Party; provided , however , that an Indemnified Party shall have the right to employ separate counsel in any such claim or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless: ( i ) the Indemnifying Party agrees to pay such fees and expenses; or ( ii ) the Indemnifying Party fails promptly to assume, or in the event of a conflict of interest cannot assume, the defense of such claim or proceeding or fails to employ counsel reasonably satisfactory to such Indemnified Party; in which case the Indemnified Party shall have the right to employ counsel and to assume the defense of such claim or proceeding at the Indemnifying Party’s expense; provided , further , however , that the Indemnifying Party shall not, in connection with any one such claim or proceeding or separate but substantially similar or related claims or proceedings in the same jurisdiction, arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one firm of attorneys (together with appropriate local counsel) at any time for all of the indemnified parties, or for fees and expenses that are not reasonable. Whether or not such defense is assumed by the Indemnifying Party, such Indemnified Party will not be subject to any liability for any settlement made without its consent (but such consent will not be unreasonably withheld). The Indemnifying Party shall not consent to entry of any judgment or enter into any settlement that ( x ) does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release, in form and substance reasonably satisfactory to the Indemnified Party, from all liability in respect of such claim or litigation for which such Indemnified Party would be entitled to indemnification hereunder or ( y ) involves the imposition of equitable remedies or the imposition of any obligations on the Indemnified Party or adversely affects such Indemnified Party other than as a result of financial obligations for which such Indemnified Party would be entitled to indemnification hereunder.

(d) Contribution . If the indemnification provided for in this Section 4 is unavailable to an Indemnified Party in respect of any Losses (other than in accordance with its terms), then each applicable Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party, on the one hand, and such Indemnified Party, on the other hand, in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party, on the one hand, and Indemnified Party, on the other hand, shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made (or omitted) by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent any such action, statement or omission.

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 4(d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 4(d), an Indemnifying Party that is a selling Holder of Registrable Securities shall not be required to contribute any amount in excess of the amount that such Indemnifying Party has otherwise been, or would otherwise be, required to pay pursuant to Section 4(b) by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are more favorable to the Holders than the foregoing provisions, the provisions in the underwriting agreement shall control.

(e) Other Indemnification . Indemnification similar to that specified in the preceding provisions of this Section 4 (with appropriate modifications) shall be given by the Company and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation or governmental authority other than the Securities Act.

(f) Non-Exclusivity . The obligations of the parties under this Section 4 shall be in addition to any liability which any party may otherwise have to any other party.

5. Registration Expenses . All reasonable fees and expenses incident to the performance of or compliance with this Agreement by the Company (including, without limitation, ( i ) all registration and filing fees (including, without limitation, fees and expenses ( A ) with respect to filings required to be made with the NASD and ( B ) of compliance with securities or “Blue Sky” laws, including, without limitation, any fees and disbursements of counsel for the underwriters in connection with “Blue Sky” qualifications of the Registrable Securities pursuant to Section 3(g), ( ii ) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities in a form eligible for deposit with The Depository Trust Company and of printing Prospectuses if the printing of Prospectuses is requested by the managing underwriters, if any, or by the Holders of a majority of the Registrable Securities included in any Registration Statement), ( iii ) messenger, telephone and delivery expenses of the Company, ( iv ) fees and disbursements of counsel for the Company, ( v ) expenses of the Company incurred in connection with any road show, ( vi ) fees and disbursements of all independent certified public accountants referred to in Section 3(m) hereof (including, without limitation, the expenses of any “cold comfort” letters required by this Agreement) and any other persons, including special experts retained by the Company, and ( vii ) fees and disbursements of counsel for the Holders of Registrable Securities whose shares are included in a Registration Statement, which counsel shall be selected by the Holders of a majority of the Registrable Securities included in such Registration Statement) (collectively, the “ Registration Expenses ”) shall be borne by the Company whether or not any Registration Statement is filed or becomes effective. In addition, the Company shall pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange on which similar securities issued by the Company are then listed and rating agency fees and the fees and expenses of any Person, including special experts, retained by the Company.

The Company shall not be required to pay ( i ) fees and disbursements of any counsel retained by any Holder of Registrable Securities or by any underwriter (except as set forth above in this Section 5), ( ii ) any underwriter’s fees (including discounts, commissions or fees of underwriters, selling brokers, dealer managers or similar securities industry professionals) relating to the distribution of the Registrable Securities (other than with respect to Registrable Securities sold by the Company) or ( iii ) any other expenses of the Holders of Registrable Securities not specifically required to be paid by the Company pursuant to the first paragraph of this Section 5.

6. Rule 144 . The Company covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder. Notwithstanding anything contained in this Section 6, the Company may deregister under Section 12 of the Exchange Act if it then is permitted to do so pursuant to the Exchange Act and the rules and regulations thereunder.

7. Miscellaneous .

(a) Termination . This Agreement will be effective as of the date hereof and will continue in effect thereafter until the earliest of ( a ) its termination by the consent of all parties hereto or their respective successors in interest, ( b ) the date on which no Registrable Securities remain outstanding and ( c ) the dissolution, liquidation or winding up of the Company, whereupon this Agreement shall terminate other than the provisions of Section 4, which shall survive any termination of this Agreement. Nothing herein shall relieve any party from any liability for the breach of any of the agreements set forth in this Agreement.

(b) Holdback Agreement . In consideration for the Company agreeing to its obligations under this Agreement, each Holder agrees in connection with any registration of the Company's securities (whether or not such Holder is participating in such registration) upon the request of the Company and the underwriters managing any underwritten offering of the Company's securities not to effect any public sale or distribution of Registrable Securities, including, but not limited to, any sale pursuant to Rule 144, or make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of, or enter into any swap or other arrangement that transfers to another Person any of the economic consequences of ownership of, any Registrable Securities, any other equity securities of the Company or any securities convertible into or exchangeable or exercisable for any equity securities of the Company without the prior written consent of the Company or such underwriters, as the case may be, during the Holdback Period, provided that nothing herein will prevent any Holder that is a partnership or corporation from making a transfer to an Affiliate that is otherwise in compliance with applicable securities laws, so long as any such transferee agrees to be so bound. Notwithstanding the foregoing, such agreement shall not apply to distributions-in-kind to a Holder’s partners or members.

If any registration pursuant to Section 2 of this Agreement shall be in connection with any underwritten public offering, the Company will not effect any public sale or distribution of any common equity (or securities convertible into or exchangeable or exercisable for common equity) (other than a registration statement ( A ) on Form S‑4, Form S‑8 or any successor forms thereto or ( B ) filed solely in connection with an exchange offer or any employee benefit or dividend reinvestment plan) for its own account, during the Holdback Period.

(c) Amendments and Waivers . This Agreement may be amended, and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if any such amendment, action or omission to act, has been approved by Stockholders holding in excess of 50% of the then outstanding Registrable Securities of the Stockholders, provided that this Agreement may not be amended in a manner that would, by its terms, adversely affect the rights or obligations of any Stockholder which does not adversely affect the rights or obligations of all similarly situated Stockholders in the same manner without the consent of such Stockholder. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms. Any Stockholder may waive (in writing) the benefit of any provision of this Agreement with respect to itself for any purpose. Any such waiver shall constitute a waiver only with respect to the specific matter described in such writing and shall in no way impair the rights of the Stockholder granting such waiver in any other respect or at any other time.

(d) Successors, Assigns and Transferees . This Agreement shall bind and inure to the benefit of and be enforceable by the parties hereto and their respective successors and permitted assigns. In addition, and whether or not any express assignment shall have been made, the provisions of this Agreement which are for the benefit of the parties hereto other than the Company shall also be for the benefit of and enforceable by any subsequent Holder of any Registrable Securities, subject to the provisions contained herein. Without limitation to the foregoing, in the event that a Stockholder or any of

its successors or assigns or any other subsequent Holder of any Registrable Securities distributes or otherwise transfers any shares of the Registrable Securities to any of its present or future shareholders, members, or general or limited partners, the Company hereby acknowledges that the registration rights granted pursuant to this Agreement shall be transferred to such shareholders, members or general or limited partners on a pro rata basis, and that at or after the time of any such distribution or transfer, any such shareholder, member, general or limited partner or group of shareholders, members or general or limited partners may designate a Person to act on its behalf in delivering any notices or making any requests hereunder.

(e) Notices . All notices and other communications to be given to any party hereunder shall be sufficiently given for all purposes hereunder if in writing and delivered by hand, courier or overnight delivery service, or three days after being mailed by certified or registered mail, return receipt requested, with appropriate postage prepaid, or when received in the form of a facsimile (receipt confirmation requested), and shall be directed to the address set forth below (or at such other address or facsimile number as such party shall designate by like notice):


(i)	if to the Company, to:

Fidelity & Guaranty Life

1001 Fleet Street, 6th Floor

Baltimore, MD 21202

Attention: General Counsel

Fax: (410) 895-0085

with a copy (which shall not constitute notice) to:

Debevoise & Plimpton LLP

919 Third Avenue

New York, New York 10022

Attention: Ethan T. James, Esq.

Fax: (212) 909-6562


(ii)	if to a Stockholder, to:

Harbinger Group, Inc.

450 Park Avenue, 30th Floor

New York, New York 10022

Attention: Kostas (Gus) Cheliotis, Esq.

Email: GCheliotis@Harbingergroupinc.com

with a copy (which shall not constitute notice) to:

Debevoise & Plimpton LLP

919 Third Avenue

New York, New York 10022

Attention: Ethan T. James, Esq.

Fax: (212) 909-6562


(v)	if to any other Stockholder, to the address of such other Stockholder as shown in the stock record book of the Company.

(f) Further Assurances . At any time or from time to time after the date hereof, the parties agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated hereby and to otherwise carry out the intent of the parties hereunder.

(g) Entire Agreement; No Third Party Beneficiaries . This Agreement constitutes the entire agreement among the parties with respect to the subject matter of this Agreement and supersede any prior discussions, correspondence, negotiation, proposed term sheet, agreement, understanding or agreement and there are no agreements, understandings, representations or warranties between the parties other than those set forth or referred to in this Agreement, and ( ii ) except as provided in Section 4 with respect to an indemnified party, this Agreement is not intended to confer in or on behalf of any Person not a party to this Agreement (and their successors and assigns) any rights, benefits, causes of action or remedies with respect to the subject matter or any provision hereof.

(h) Governing Law; Jurisdiction and Forum; Waiver of Jury Trial . (i) This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts executed and to be performed wholly within such State and without reference to the choice-of-law principles that would result in the application of the laws of a different jurisdiction.

(i) In any judicial proceeding involving any dispute, controversy or claim arising out of or relating to this Agreement, each of the parties unconditionally accepts the jurisdiction and venue of any court in the State of New York or if jurisdiction over the matter is vested exclusively in federal courts, the United States District Court for the Southern District of New York, and the appellate courts to which orders and judgments thereof may be appealed. In any such judicial proceeding, the parties agree that in addition to any method for the service of process permitted or required by such courts, to the fullest extent permitted by law, service of process may be made by delivery provided pursuant to the directions in Section 3.4. EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING ANY DISPUTE, CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

(i) Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party hereto. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

(j) Enforcement . Each party hereto acknowledges that money damages would not be an adequate remedy in the event that any of the covenants or agreements in this Agreement are not performed in accordance with its terms, and it is therefore agreed that in addition to and without limiting any other remedy or right it may have, the non-breaching party will have the right to an injunction, temporary restraining order or other equitable relief in any court of competent jurisdiction enjoining any such breach and enforcing specifically the terms and provisions hereof.

(k) Titles and Subtitles . The titles of the sections and subsections of this Agreement are for convenience of reference only and will not affect the meaning or interpretation of this Agreement.

(l) No Recourse . Notwithstanding anything that may be expressed or implied in this Agreement, the Company and each Stockholder covenant, agree and acknowledge that no recourse under this Agreement or any documents or instruments delivered in connection with this Agreement shall be had against any current or future director, officer, employee, shareholder, general or limited partner or member of any Stockholder or of any Affiliate or assignee thereof, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law, it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any current or future director, officer, employee, shareholder, general or limited partner or member of any Stockholder or of any Affiliate or assignee thereof, as such for any obligation of any Stockholder under this Agreement or any documents or instruments delivered in connection with this Agreement for any claim based on, in respect of or by reason of such obligations or their creation.

(m) Counterparts; Facsimile Signatures . This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. This Agreement may be executed by facsimile signature(s).

[Remainder of page intentionally left blank.]

IN WITNESS WHEREOF, each of the undersigned has executed this Agreement or caused this Agreement to be duly executed on its behalf as of the date first written above.

FIDELITY & GUARANTY LIFE

By: /s/ Eric L. Marhoun

Name: Eric L. Marhoun

Title: Executive Vice President, General Counsel and Secretary

[ Signature Page - Registration Rights Agreement ]

HARBINGER GROUP, INC.

By: /s/ Thomas Williams

Name: Thomas Williams

Title: Executive Vice President, Chief Financial Officer

[ Signature Page - Registration Rights Agreement ]

Exhibit A

JOINDER AGREEMENT

Reference is made to the ( i ) Registration Rights Agreement, dated as of [•], 2013 (as amended from time to time, the “ Registration Rights Agreement ”), among the Company and certain stockholders of the Company party thereto. The undersigned agrees, by execution hereof, to become a party to, and to be subject to the rights and obligations under, the Registration Rights Agreement.

[NAME]

By:

Name:

Title:

Date:

Acknowledged by:

FIDELITY & GUARANTY LIFE

By:

Name:

Title:

Date:

Exhibit 10.17

FIDELITY & GUARANTY LIFE

2013 RESTRICTED STOCK AGREEMENT (FOR COMPENSATION COMMITTEE MEMBER)

This RESTRICTED STOCK AGREEMENT, dated as of December 12, 2013 (the “ Grant Date ”) (this “ Agreement ”) is entered into by and between Fidelity & Guaranty Life, a Delaware corporation (the “ Company ”) and [[FIRSTNAME]] [[LASTNAME]] (the “ Employee ”).

WHEREAS, the Company and the Employee intend hereby to enter into this Agreement to evidence the Award of Restricted Stock to the Employee.

NOW, THEREFORE, in consideration of the premises and subject to the terms and conditions set forth herein, the parties hereto agree as follows:

The Company and the Employee hereby agree as follows:

Section 1. Grant of Restricted Stock . Subject to the terms of this Agreement, the Company hereby evidences and confirms, effective as of the date hereof, its grant to the Employee of the number of shares of Restricted Stock specified on the signature page hereof. This grant is not made under the Plan; however, this grant shall be construed and administered as though it were subject to the terms of the Plan. As of the Grant Date, the Restricted Stock will be registered in the Employee’s name. The Employee agrees that, within twenty-five days of the Grant Date, the Employee shall give notice to the Company as to whether or not the Employee has made an election pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, with respect to the Restricted Stock.

Section 2. Vesting and Forfeiture

(a) Based on Continued Employment . The Restricted Stock shall vest in three equal installments on the first through third anniversaries of the Grant Date, subject to the Employee’s continued employment with the Company through the applicable vesting date.

(b) Alternative Award . No acceleration of vesting shall occur with respect to Restricted Stock if the Committee reasonably determines prior to the Change in Control that the Restricted Stock agreement shall be honored or assumed, or new rights substituted therefor following the Change in Control (such honored, assumed, or substituted award, an “ Alternative Award ”), provided that any Alternative Award must:

(i) Give the Employee who held Restricted Stock rights and entitlements substantially equivalent to or better than the rights and terms applicable under this Restricted Stock agreement, including but not limited to an identical or better vesting schedule; and

(ii) Have terms such that if, following a Change in Control, an Employee’s employment is involuntarily or constructively terminated (other than for Cause) at a time when any portion of the Alternative Award is non-vested, the non-vested portion of such Alternative Award shall immediately vest in full. For purposes of this Section 2(b), involuntary termination of employment refers to actual, involuntary termination of employment (other than for Cause), and constructive termination of employment refers to any of the following (other than for Cause) occurring within two years following the Change in Control: (A) material diminution in duties; (B) material diminution in compensation, or (C) a requirement to relocate to a primary place of business more than 50 miles from Employee’s primary plan of business immediately prior to the Change in Control.

(c) Notwithstanding Section 2(b), if the Committee, in its discretion, determines that the Employee will not receive an Alternative Award, any Restricted Stock that is unvested as of the Change in Control shall automatically become vested as of the Change in Control (provided that the Employee has remained continuously employed by the Company through the Change in Control).

(d) Limitation of Benefits . In the event that it is determined that any acceleration of vesting, payment or other value provided under this Agreement in connection with a change in control would be considered “parachute payments” within the meaning of Section 280G of the Code (the “Parachute Payments”) that, but for this Section 6(c) would be payable to Grantee hereunder, and would, when combined with any other Parachute Payments under any other agreement or arrangement, exceed the greatest amount of Parachute Payments that could be paid to Employee without giving rise to any liability for the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the aggregate amount of Parachute Payments payable to Employee hereunder shall be reduced such that it shall not exceed the amount that produces the greatest after-tax benefit to Employee after taking into account any Excise Tax to be payable by Employee.

(e) Discretionary Acceleration . The Board, in its sole discretion, may accelerate the vesting of all or a portion of the Restricted Stock at any time and from time to time.

(f) Effect of Termination of Employment . If the Employee’s employment with the Company is terminated by the Employee or by the Company, any unvested Restricted Stock shall be forfeited as of the date of termination.

(g) No Other Accelerated Vesting . The vesting provisions set forth in this Section 2, or expressly set forth in the Plan, shall be the exclusive vesting provisions applicable to the shares of Restricted Stock and shall supersede any other provisions relating to vesting, unless such other such provision expressly refers to this Agreement by name and date.

Section 3. Dividends

If the Company pays any cash dividend on the Stock, the Company shall credit to the Employee’s account an amount equal to the product of ( x ) the number of shares of unvested Restricted Stock as of the record date for such distribution times ( y ) the per share amount of such dividend on Stock. Any cash amounts credited to the Employee’s account shall be paid to the Employee on the applicable Vesting Date (as defined below), or alternatively, shall be forfeited at the same time Employee’s unvested Restricted Stock is forfeited. If the Company makes any dividend payment on the Stock in the form of Stock or other securities, the Company will credit the Employee’s account with that number of additional shares of Stock or other securities that would have been distributed with respect to that number of shares of Stock underlying the unvested Restricted Stock as of the record date thereof. Any such additional shares of Stock or other securities shall be subject to the same vesting and transfer restrictions as apply to the Restricted Stock.

Section 4. Vesting of Restricted Stock

On each date on which shares of Restricted Stock become vested pursuant to this Agreement (each, a “ Vesting Date ”), subject to Section 8(a), the shares of Restricted Stock that have then vested (the “ Vested Shares ”) shall cease to be subject to this Agreement.

Section 5. Employee’s Representations and Warranties

(a) Access to Information, Etc. The Employee represents and warrants as follows:

(i) the Employee understands the terms and conditions that apply to the Restricted Stock and the risks associated with the Restricted Stock; and

(ii) as of the Grant Date, the Employee is an officer or employee of the Company or one of its Subsidiaries.

(b) No Right to Awards . The Employee acknowledges and agrees that the grant of any Restricted Stock ( i ) is being made on an exceptional basis and is not intended to be renewed or repeated, ( ii ) is entirely voluntary on the part of the Company and its Subsidiaries; and ( iii ) should not be construed as creating any obligation on the part of the Company or any of its Subsidiaries to offer any Restricted Stock in the future.

Section 6. Restriction on Transfer; Legending .

(a) Prior to the applicable vesting date, the Restricted Stock is not assignable or transferable, in whole or in part, and it may not, directly or indirectly, be offered, transferred, sold, pledged, assigned, alienated, hypothecated or otherwise disposed of or encumbered (including, but not limited to, by gift, operation of law or otherwise). Any purported transfer in violation of this Section 6 shall be void ab initio.

(b) Prior to the applicable Vesting Date, a restrictive legend shall be placed on any certificates representing the shares of Restricted Stock that makes clear that the shares are subject to the vesting conditions set forth in this Agreement and a notation shall be made in the appropriate records of the Company or any transfer agent indicating that the shares are subject to such restrictions.

Section 7. Certain Definitions . As used in this Agreement, capitalized terms that are not defined herein have the respective meanings given to them in the Plan, and the following additional terms shall have the following meanings:

“ Agreement ” means this Employee Restricted Stock Agreement, as amended from time to time in accordance with the terms hereof.

“ Cause ” as to any Employee who is party to an employment agreement with the Company or a Subsidiary or Affiliate, has the same meaning as set forth in such employment agreement. In the absence of such an employment agreement, “Cause” shall mean the Employee (i) shall have been convicted, indicted for, or entered a plea of nolo contendere to, any felony or any other act involving fraud, theft, misappropriation, dishonesty, or embezzlement, (ii) shall have committed intentional and willful acts of misconduct that materially impair the goodwill or business of the Company or cause material damage to its property, goodwill, or business, or (iii) shall have willfully refused to, or willfully failed to, perform in any material respect his or her duties, provided, however, that no such termination for Cause under clause (iii) shall be effective unless the Employee does not cure such refusal or failure to the Company’s reasonable satisfaction as soon as practicable after the Company gives the Employee written notice identifying such refusal or failure (and, in any event, within ten (10) calendar days after receipt of such written notice). The determination as to whether “Cause” has occurred shall be made by the Committee, which shall have the authority to waive the consequences under the Plan of the existence or occurrence of any of the events, acts or commissions constituting “Cause.” A termination for Cause shall be deemed to include a determination following an Employee’s termination of employment for any reason that circumstances existed prior to such termination sufficient for the Company or one of its Subsidiaries or Affiliates to have terminated such Employee’s employment for Cause.

“ Employee ” means the grantee of the Restricted Stock whose name is set forth on the signature page of this Agreement (whether an employee, consultant or director); provided that following such person’s death the “Employee” shall be deemed to include such person’s beneficiary or estate and following such person’s Disability, the “Employee” shall be deemed to include such person’s legal representative.

“ Plan ” means the Fidelity & Guaranty Life 2013 Stock Incentive Plan, as amended from time

to time in accordance with its terms. This grant is not made under the Plan; however, this grant shall be construed and administered as though it were subject to the terms of the Plan.

“ Restricted Stock ” means the Stock evidenced by (and subject to the terms and conditions of) this Agreement.

“ Securities Act ” means the United States Securities Act of 1933, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

“ Vested Shares ” has the meaning given in Section 4.

“ Vesting Date ” has the meaning given in Section 4.

Section 8. Miscellaneous

(a) Withholding . The Company or one of its Subsidiaries shall require the Employee to remit to the Company an amount in cash sufficient to satisfy any applicable U.S. federal, state and local and non-U.S. tax withholding obligations that may arise in connection with the vesting of the Restricted Stock. In order to give effect to this Section 8(a), if so permitted by the Committee, the Company may retain a number of shares of Restricted Stock that have an aggregate Fair Market Value as of the Vesting Date equal to the amount of such taxes required to be withheld (and the Employee shall thereupon be deemed to have satisfied his obligations under this Section 8(a)). The number of shares of Restricted Stock subject to vesting on such Vesting Date shall thereupon be reduced by the number of shares so retained. The foregoing method of withholding shall not be applied to the extent that the Employee elects to satisfy his withholding obligation by delivery of cash to the Company from other sources. In addition, the foregoing method of withholding shall not be available if withholding in this manner would violate any financing instrument of the Company or any of its Subsidiaries.

(b) Authorization to Share Personal Data . The Employee authorizes any affiliate of the Company that employs the Employee or that otherwise has or lawfully obtains personal data relating to the Employee to divulge such personal data to the Company if and to the extent appropriate in connection with this Agreement.

(c) Notices . All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given if delivered personally or sent by certified or express mail, return receipt requested, postage prepaid, or by any recognized international equivalent of such delivery, to the Company or the Employee, as the case may be, at the following addresses or to such other address as the Company or the Employee, as the case may be, shall specify by notice to the other:

(i) if to the Company, to it at:

Fidelity & Guaranty Life

1001 Fleet Street, 6th Floor

Baltimore, MD 21202

Att: General Counsel

With a copy to:

Harbinger Group, Inc.

450 Park Ave, 30th Floor

New York New York 10022

Att: General Counsel

(ii) if to the Employee, to the Employee at his or her most recent address as shown on the books and records of the Company or Subsidiary employing the Employee.

All such notices and communications shall be deemed to have been received on the date of delivery if delivered personally or on the third business day after the mailing thereof.

(d) Binding Effect; Benefits . This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.

(e) Waiver . Any party hereto or beneficiary hereof may by written notice to the other parties ( A ) extend the time for the performance of any of the obligations or other actions of the other parties under this Agreement, ( B ) waive compliance with any of the conditions or covenants of the other parties contained in this Agreement and ( C ) waive or modify performance of any of the obligations of the other parties under this Agreement. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party or beneficiary, shall be deemed to constitute a waiver by the party or beneficiary taking such action of compliance with any representations, warranties, covenants or agreements contained herein. The waiver by any party hereto or beneficiary hereof of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by a party or beneficiary to exercise any right or privilege hereunder shall be deemed a waiver of such party’s or beneficiary’s rights or privileges hereunder or shall be deemed a waiver of such party’s or beneficiary’s rights to exercise the same at any subsequent time or times hereunder.

(f) Amendment . This Agreement may not be amended, modified or supplemented orally, but only by a written instrument executed by the Employee and the Company.

(g) Assignability . Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or the Employee without the prior written consent of the other party.

(h) Applicable Law . This Agreement shall be governed by and construed in accordance with the law of the State of Delaware regardless of the application of rules of conflict of law that would apply the laws of any other jurisdiction.

(i) Arbitration; Waiver of Jury Trial . Any dispute, controversy or claim arising out of or pursuant to this Agreement, or any undertakings, covenants and agreements incorporated by reference into this Agreement shall be adjudicated in accordance with Section 5 of the Plan (even though this grant is not made under the Plan).

(j) Titles and Headings . The titles and headings of the sections in this Agreement are for convenience of reference only and shall not affect the meaning or interpretation of this Agreement.

(k) Gender and Number . Except where otherwise indicated by the context, any masculine term used herein shall also include the feminine; the plural shall include the singular and the singular shall include the plural.

(l) Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.

(m) No Right to Continued Employment . Nothing in this Agreement shall be deemed to confer on the Employee any right to continue in the employ of the Company or any Subsidiary, or to interfere with or limit in any way the right of the Company or any Subsidiary to terminate such employment at any time.

(n) Clawback . Employee acknowledges and agrees to be bound by the clawback provisions set forth in Section 20(b) of the Plan (even though this grant is not made under the Plan).

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Company and the Employee have executed this Agreement as of the date first above written.

FIDELITY & GUARANTY LIFE

By:

Name: Lee Launer

Title: President & CEO

THE EMPLOYEE:

[[FIRSTNAME]] [[LASTNAME]]



Total Number of Shares of Restricted Stock (Common Stock) Granted Pursuant to this Agreement:	[[SHARESGRANTED]]

Exhibit 10.18

FIDELITY & GUARANTY LIFE

2013 NON-STATUTORY STOCK OPTION AGREEMENT (FOR COMPENSATION COMMITTEE MEMBER)

This Employee Non-Statutory Stock Option Agreement (the “ Agreement ”), dated as of December 12, 2013, is entered into between Fidelity & Guaranty Life, a Delaware corporation, and the Employee whose name appears on the signature page hereof.

The Company and the Employee hereby agree as follows:

Section 1. Certain Definitions . Capitalized terms used in this Agreement and not defined herein shall have the respective meaning ascribed to such terms in the Plan. The following additional terms shall have the following meanings:

“ Aggregate Price ” has the meaning set forth in Section 5(a).

“ Agreement ” means this Employee Non-Statutory Stock Option Agreement, as amended from time to time in accordance with the terms hereof.

“ Employee ” means the grantee of the Non-Statutory Stock Options (whether an employee, consultant or director), whose name is set forth on the signature page of this Agreement; provided that following such person’s death “Employee” shall be deemed to include such person’s beneficiary or estate and following such person’s Disability, “Employee” shall be deemed to include such person’s legal representative.

“ Exercise Date ” has the meaning set forth in Section 5(a).

“ Exercise Price ” has the meaning set forth in Section 5(a).

“ Financing Agreements ” means any guaranty, financing or security agreement or document entered into by the Company or any Subsidiary from time to time.

“ Normal Termination Date ” has the meaning set forth in Section 4(a).

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

Section 2. Grant of Non-Statutory Stock Options

(a) Confirmation of Grant . The Company hereby evidences and confirms, effective as of the date hereof, its grant to the Employee of Non-Statutory Stock Options to purchase the number of shares of Stock specified on the signature page hereof. The Non-Statutory Stock Options are not intended to be incentive stock options under the Code. This grant is not made under the Plan; however, this grant shall be construed and administered as though it were subject to the terms of the Plan.

(b) Exercise Price . Each share of Stock covered by an Non-Statutory Stock Option shall have the Exercise Price specified on the signature page hereof.

Section 3. Vesting and Exercisability

(a) Vesting . Except as otherwise provided in Section 3(b) or 6 of this Agreement, the Non-Statutory Stock Options shall become vested in three equal installments on each of the first through third anniversaries of the Grant Date, subject to the continuous employment of the Employee with the Company until the applicable vesting date.

(b) Discretionary Acceleration . The Committee, in its sole discretion, may accelerate the vesting or exercisability of all or a portion of the Non-Statutory Stock Options, at any time and from time to time.

(c) Exercise . Once vested in accordance with the provisions of this Agreement, the Non-Statutory Stock Options may be exercised at any time and from time to time prior to the date such Non-Statutory Stock Options terminate pursuant to Section 4. Non-Statutory Stock Options may only be exercised with respect to whole shares of Stock and must be exercised in accordance with Section 5.

Section 4. Termination of Non-Statutory Stock Options

(a) Normal Termination Date . Unless earlier terminated pursuant to Section 4(b) or Section 6, the Non-Statutory Stock Options shall terminate on the seventh anniversary of the Grant Date (the “ Normal Termination Date ”), if not exercised prior to such date.

(b) Early Termination . If the Employee’s employment with the Company terminates for any reason, any Non-Statutory Stock Options held by the Employee that have not vested before the effective date of such termination of employment shall terminate immediately upon such termination of employment and, if the Employee’s employment is terminated for Cause, all Non-Statutory Stock Options (whether or not then vested or exercisable) shall automatically terminate immediately upon such termination.

Section 5. Manner of Exercise

(a) General . Subject to such reasonable administrative regulations as the Committee may adopt from time to time, the Employee may exercise vested Non-Statutory Stock Options by giving advance notice to the Company specifying the proposed date on which the Employee desires to exercise a vested Non-Statutory Stock Option (the “ Exercise Date ”), the number of whole shares with respect to which the Non-Statutory Stock Options are being exercised (the “ Exercise Shares ”) and the aggregate Exercise Price for such Exercise Shares (the “ Aggregate Price ”). Subject to Section 6(c) of the Plan, on or before the Exercise Date the Employee shall deliver to the Company full payment for the Exercise Shares in United States dollars in cash, or cash equivalents satisfactory to the Company, or, if so permitted by the Committee (and on such conditions as the Committee shall

determine) ( A ) through a net issuance arrangement pursuant to which a number of shares of Stock subject to the portion of the Non-Statutory Stock Option being exercised, having a Fair Market Value equal to the applicable exercise price plus the required minimum withholding taxes, are retained by the Company or ( B ) by using a broker assisted cashless exercise program acceptable to the Committee, and the Company shall direct such issuance to be registered by the Company’s transfer agent. The Company may require the Employee to furnish or execute such other documents as the Company shall reasonably deem necessary ( i ) to evidence such exercise, or ( ii ) to comply with or satisfy the requirements of the Securities Act, applicable state or non-U.S. securities laws or any other law.

(b) Restrictions on Exercise . Notwithstanding any other provision of this Agreement, the Non-Statutory Stock Options may not be exercised in whole or in part, and no certificates representing Exercise Shares shall be delivered, ( i ) unless ( A ) all requisite approvals and consents of any governmental authority of any kind shall have been secured, ( B ) the Exercise Shares shall have been registered under such laws, and ( C ) all applicable U.S. federal, state and local and non-U.S. tax withholding requirements shall have been satisfied or ( ii ) if such exercise would result in a violation of the terms or provisions of or a default or an event of default under, any of the Financing Agreements. The Company shall use its commercially reasonable efforts to obtain any consents or approvals referred to in clause (i) (A) of the preceding sentence, but shall otherwise have no obligations to take any steps to prevent or remove any impediment to exercise described in such sentence.

(c) Treatment of vested Non-Statutory Stock Options upon Termination of Employment . All vested Non-Statutory Stock Options held by the Employee following the effective date of a termination of employment shall expire if not exercised by the Employee within 30 days following the effective date of such termination of employment or upon the Normal Termination Date, if earlier.

Section 6. Change in Control .

(a) Alternative Award . No cancellation, acceleration, vesting, lapse of restrictions or other payment shall occur with respect to any Non-Statutory Stock Options in connection with a Change in Control if the Committee reasonably determines in good faith, prior to the occurrence of the Change in Control, that such Non-Statutory Stock Options shall be honored or assumed, or new rights substituted therefor following the Change in Control (such honored, assumed, or substituted award, an “ Alternative Award ”), provided that any Alternative Award must:

(i) Give the Employee who held such Non-Statutory Stock Options rights and entitlements substantially equivalent to or better than the rights and terms applicable under such Non-Statutory Stock Options, including but not limited to an identical or better exercise and vesting schedule, and identical or better timing and methods of payment; and

(ii) Have terms such that if, following a Change in Control, an Employee’s employment is involuntarily or constructively terminated (other than for Cause) at a time when any portion of the Alternative Award is non-vested, the non-vested portion of such Alternative Award shall immediately vest and become exercisable in full. For purposes of this Section 6(a)(ii), involuntary termination of employment refers to actual, involuntary termination of employment (other than for Cause), and constructive termination of employment refers to any of the following (other than for Cause) occurring within two years following the Change in Control: (A) material diminution in duties; (B) material diminution in compensation, or (C) a requirement to relocate to a primary place of business more than 50 miles from Employee’s primary plan of business immediately prior to the Change in Control.

(b) Vesting and Cancellation . Notwithstanding Section 6(a), if the Committee, in its discretion, determines that the Employee will not receive an Alternative Award, all of Employee’s outstanding unvested Non-Statutory Stock Options shall vest, and all outstanding Non-Statutory Stock Options shall remain exercisable only for 30 days following the Change in Control, at which time they shall expire, unless the Committee, in its discretion, determines to cancel the Non-Statutory

Options in exchange for payment to Employee of the excess of the Fair Market Value of the Stock subject to the Options over the exercise price of the Options, as set forth in Section 13(b) of the Plan (or otherwise take action with respect to the Options as set forth in Section 13(b) of the Plan).

(c) Limitation of Benefits . In the event that it is determined that any acceleration of vesting, payment or other value provided under this Agreement in connection with a change in control would be considered “parachute payments” within the meaning of Section 280G of the Code (the “Parachute Payments”) that, but for this Section 6(c) would be payable to Grantee hereunder, and would, when combined with any other Parachute Payments under any other agreement or arrangement, exceed the greatest amount of Parachute Payments that could be paid to Employee without giving rise to any liability for the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the aggregate amount of Parachute Payments payable to Employee hereunder shall be reduced such that it shall not exceed the amount that produces the greatest after-tax benefit to Employee after taking into account any Excise Tax to be payable by Employee.

Section 7. Miscellaneous .

(a) Withholding . The Company or one of its Subsidiaries shall have the power to withhold, or to require the Employee to remit to the Company an amount in cash sufficient to satisfy any applicable U.S. federal, state and local and non-U.S. tax withholding or other similar charges or fees that may arise in connection with the grant, vesting, exercise or purchase of the Non-Statutory Stock Options.

(b) Authorization to Share Personal Data . The Employee authorizes any affiliate of the Company that employs the Employee or that otherwise has or lawfully obtains personal data relating to the Employee to divulge or transfer such personal data to the Company or to a third party, in each case in any jurisdiction, if and to the extent necessary or appropriate in connection with this Agreement.

(c) No Rights as Stockholder; No Voting Rights . The Employee shall have no rights as a stockholder of the Company with respect to any shares of Stock covered by the Non-Statutory Stock Options until the exercise of the Non-Statutory Stock Options and delivery of the shares of Stock. Except as provided in Section 13 of the Plan, no adjustment shall be made for dividends or other rights for which the record date is prior to the delivery of the shares of Stock.

(d) No Right to Continued Employment . Nothing in this Agreement shall be deemed to confer on the Employee any right to continue in the employ of the Company or any Subsidiary, or to interfere with or limit in any way the right of the Company or any Subsidiary to terminate such employment at any time.

(e) Non-Transferability of Non-Statutory Stock Options . The Non-Statutory Stock Options may be exercised only by the Employee, or, following the Employee’s death, by his designated beneficiary or by his estate in the absence of a designated beneficiary. The Non-Statutory Stock Options are not assignable or transferable, in whole or in part, and they may not, directly or indirectly, be offered, transferred, sold, pledged, assigned, alienated, hypothecated or otherwise disposed of or encumbered (including, but not limited to, by gift, operation of law or otherwise) other than by will or by the laws of descent and distribution to the estate of the Employee upon the Employee’s death or with the Company’s consent.

(f) Notices . All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given if delivered personally or sent by certified or express mail, return receipt requested, postage prepaid, or by any recognized international equivalent of such delivery, to the Company or the Employee, as the case may be, at the following addresses or to such other address as the Company or the Employee, as the case may be, shall specify by notice to the other:

(i) if to the Company, to it at:

Fidelity & Guaranty Life

1001 Fleet Street, 6th Floor

Baltimore, MD 21202

Att: General Counsel

With a copy to:

Harbinger Group, Inc.

450 Park Ave, 30th Floor

New York New York 10022

Att: General Counsel

(ii) if to the Employee, to the Employee at his or her most recent address as shown on the books and records of the Company or Subsidiary employing the Employee.

All such notices and communications shall be deemed to have been received on the date of delivery if delivered personally or on the third business day after the mailing thereof.

(g) Binding Effect; Benefits . This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.

(h) Waiver . Any party hereto or beneficiary hereof may by written notice to the other parties ( A ) extend the time for the performance of any of the obligations or other actions of the other parties under this Agreement, ( B ) waive compliance with any of the conditions or covenants of the other parties contained in this Agreement and ( C ) waive or modify performance of any of the obligations of the other parties under this Agreement. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party or beneficiary, shall be deemed to constitute a waiver by the party or beneficiary taking such action of compliance with any representations, warranties, covenants or agreements contained herein. The waiver by any party hereto or beneficiary hereof of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by a party or beneficiary to exercise any right or privilege hereunder shall be deemed a waiver of such party’s or beneficiary’s rights or privileges hereunder or shall be deemed a waiver of such party’s or beneficiary’s rights to exercise the same at any subsequent time or times hereunder.

(i) Amendment . This Agreement may not be amended, modified or supplemented orally, but only by a written instrument executed by the Employee and the Company.

(j) Assignability . Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or the Employee without the prior written consent of the other party.

(k) Applicable Law . This Agreement shall be governed by and construed in accordance with the law of the State of Delaware regardless of the application of rules of conflict of law that would apply the laws of any other jurisdiction.

(l) Arbitration; Waiver of Jury Trial . Any dispute, controversy or claim arising out of or pursuant to this Agreement, or any undertakings, covenants and agreements incorporated by reference

into this Agreement shall be adjudicated as provided in Section 5 of the Plan (even though this grant is not made under the Plan).

(m) Titles and Headings . The titles and headings of the sections in this Agreement are for convenience of reference only and shall not affect the meaning or interpretation of this Agreement.

(n) Gender and Number . Except where otherwise indicated by the context, any masculine term used herein shall also include the feminine; the plural shall include the singular and the singular shall include the plural.

(o) Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.

(p) Clawback . Employee acknowledges and agrees to be bound by the clawback provisions set forth in Section 21(b) of the Plan (even though this grant is not made under the Plan).

IN WITNESS WHEREOF, the Company and the Employee have executed this Agreement as of the date first above written.

FIDELITY & GUARANTY LIFE

By:

Name: Lee Launer

Title: President & CEO

THE EMPLOYEE:

[[FIRSTNAME]] [[LASTNAME]]

Address of the Employee:

[[RESADDR1]]

[[RESADDR2]]

[[RESCITY]], [[RESSTATEORPROV]] [[RESPOSTALCODE]]



Total Number of Shares for the Purchase of Which Non-Statutory Stock Options have been Granted	Exercise Price
[[SHARESGRANTED]]	$17.00

Exhibit 10.19

FIDELITY & GUARANTY LIFE

2013 UNRESTRICTED STOCK AGREEMENT

This UNRESTRICTED STOCK AGREEMENT, dated as of December 12, 2013 (the “ Grant Date ”) (this “ Agreement ”) is entered into by and between Fidelity & Guaranty Life, a Delaware corporation (the “ Company ”) and [[FIRSTNAME]] [[LASTNAME]] (the “ Employee ”).

WHEREAS, the Company and the Employee intend hereby to enter into this Agreement to evidence the Award of Unrestricted Stock to the Employee.

NOW, THEREFORE, in consideration of the premises and subject to the terms and conditions set forth herein, the parties hereto agree as follows:

Section 1. Grant of Unrestricted Stock . Subject to the terms of this Agreement, the Company hereby evidences and confirms, effective as of the date hereof, its grant to the Employee of the number of shares of Unrestricted Stock specified on the signature page hereof. This Agreement is entered into pursuant to, and the terms of the Unrestricted Stock are subject to, the terms of the Plan. As of the Grant Date, the Unrestricted Stock will be registered in the Employee’s name.

Section 2. Vesting . The Unrestricted Stock granted pursuant to this Agreement shall be fully vested at all times.

Section 3. Employee’s Representations and Warranties

(a) Access to Information, Etc. The Employee represents and warrants as follows:

(i) the Employee understands the terms and conditions that apply to the Unrestricted Stock and the risks associated with the Unrestricted Stock; and

(ii) as of the Grant Date, the Employee is an officer, employee or director of the Company or one of its Subsidiaries.

(b) No Right to Awards . The Employee acknowledges and agrees that the grant of any Unrestricted Stock ( i ) is being made on an exceptional basis and is not intended to be renewed or repeated, ( ii ) is entirely voluntary on the part of the Company and its Subsidiaries; and ( iii ) should not be construed as creating any obligation on the part of the Company or any of its Subsidiaries to offer any Unrestricted Stock in the future.

Section 4. Certain Definitions . As used in this Agreement, capitalized terms that are not defined herein have the respective meanings given to them in the Plan, and the following additional terms shall have the following meanings:

“ Agreement ” means this Employee Unrestricted Stock Agreement, as amended from time to time in accordance with the terms hereof.

“ Employee ” means the grantee of the Unrestricted Stock whose name is set forth on the signature page of this Agreement (whether an employee, consultant or director); provided that following such person’s death the “Employee” shall be deemed to include such person’s beneficiary or estate and following such person’s Disability, the “Employee” shall be deemed to include such person’s legal representative.

“ Plan ” means the Fidelity & Guaranty Life 2013 Stock Incentive Plan, as amended from time

to time in accordance with its terms.

“ Unrestricted Stock ” means the Stock evidenced by (and subject to the terms and conditions of) this Agreement and the Plan.

“ Securities Act ” means the United States Securities Act of 1933, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

Section 5. Miscellaneous

(a) Withholding . The Company or one of its Subsidiaries shall require the Employee to remit to the Company an amount in cash sufficient to satisfy any applicable U.S. federal, state and local and non-U.S. tax withholding obligations that arise upon grant of the Unrestricted Stock. In order to give effect to this Section 5(a), if so permitted by the Committee, the Company may retain a number of shares of Unrestricted Stock that have an aggregate Fair Market Value as of the Grant Date equal to the amount of such taxes required to be withheld (and the Employee shall thereupon be deemed to have satisfied his obligations under this Section 5(a)). The foregoing method of withholding shall not be applied to the extent that the Employee elects to satisfy his withholding obligation by delivery of cash to the Company from other sources. In addition, the foregoing method of withholding shall not be available if withholding in this manner would violate any financing instrument of the Company or any of its Subsidiaries.

(i) if to the Company, to it at:

Fidelity & Guaranty Life

1001 Fleet Street, 6th Floor

Baltimore, MD 21202

Att: General Counsel

With a copy to:

Harbinger Group, Inc.

450 Park Ave, 30th Floor

New York New York 10022

Att: General Counsel

(ii) if to the Employee, to the Employee at his or her most recent address as shown on the books and records of the Company or Subsidiary employing the Employee.

All such notices and communications shall be deemed to have been received on the date of delivery if delivered personally or on the third business day after the mailing thereof.

(d) Binding Effect; Benefits . This Agreement shall be binding upon and inure to the

benefit of the parties to this Agreement and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.

(f) Amendment . This Agreement may not be amended, modified or supplemented orally, but only by a written instrument executed by the Employee and the Company.

(i) Arbitration; Waiver of Jury Trial . Any dispute, controversy or claim arising out of or pursuant to the Plan, this Agreement, any other agreement entered into pursuant to the Plan or any undertakings, covenants and agreements incorporated by reference into the Plan or this Agreement shall be adjudicated in accordance with Section 5 of the Plan.

(j) Titles and Headings . The titles and headings of the sections in this Agreement are for convenience of reference only and shall not affect the meaning or interpretation of this Agreement.

(n) Clawback . Employee acknowledges and agrees to be bound by the clawback provisions set forth in Section 20(b) of the Plan.

IN WITNESS WHEREOF, the Company and the Employee have executed this Agreement as of the date first above written.

FIDETLITY & GUARANTY LIFE

By:

Name: Lee Launer

Title: President & CEO

THE EMPLOYEE:

[[FIRSTNAME]] [[LASTNAME]]



Total Number of Shares of Unrestricted Stock (Common Stock) Granted Pursuant to this Agreement:	[[SHARESGRANTED]]

Exhibit 10.20

FIDELITY & GUARANTY LIFE

2013 UNRESTRICTED STOCK AGREEMENT FOR COMPENSATION COMMITTEE MEMBER

WHEREAS, the Company and the Employee intend hereby to enter into this Agreement to evidence the Award of Unrestricted Stock to the Employee.

NOW, THEREFORE, in consideration of the premises and subject to the terms and conditions set forth herein, the parties hereto agree as follows:

Section 1. Grant of Unrestricted Stock . Subject to the terms of this Agreement, the Company hereby evidences and confirms, effective as of the date hereof, its grant to the Employee of the number of shares of Unrestricted Stock specified on the signature page hereof. This grant is not made under the Plan; however, this Agreement shall be construed and administered as though it were subject to the terms of the Plan. As of the Grant Date, the Unrestricted Stock will be registered in the Employee’s name.

Section 2. Vesting . The Unrestricted Stock granted pursuant to this Agreement shall be fully vested at all times.

Section 3. Employee’s Representations and Warranties

(a) Access to Information, Etc. The Employee represents and warrants as follows:

(i) the Employee understands the terms and conditions that apply to the Unrestricted Stock and the risks associated with the Unrestricted Stock; and

(ii) as of the Grant Date, the Employee is an officer, employee or director of the Company or one of its Subsidiaries.

“ Agreement ” means this Employee Unrestricted Stock Agreement, as amended from time to time in accordance with the terms hereof.

“ Plan ” means the Fidelity & Guaranty Life 2013 Stock Incentive Plan, as amended from time to time in accordance with its terms. This grant is not made under the Plan; however, this Agreement shall be construed and administered as though it were subject to the terms of the Plan.

“ Unrestricted Stock ” means the Stock evidenced by (and subject to the terms and conditions of) this Agreement.

“ Securities Act ” means the United States Securities Act of 1933, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

Section 5. Miscellaneous

(a) Withholding . The Company or one of its Subsidiaries shall require the Employee to remit to the Company an amount in cash sufficient to satisfy any applicable U.S. federal, state and local and non-U.S. tax withholding obligations that arise upon grant of the Unrestricted Stock. In order to give effect to this Section 5(a), if so permitted by the Committee, the Company may retain a number of shares of Unrestricted Stock that have an aggregate Fair Market Value as of the Grant Date equal to the amount of such taxes required to be withheld (and the Employee shall thereupon be deemed to have satisfied his obligations under this Section 5(a)). The foregoing method of withholding shall not be applied to the extent that the Employee elects to satisfy his withholding obligation by delivery of cash to the Company from other sources. In addition, the foregoing method of withholding shall not be available if withholding in this manner would violate any financing instrument of the Company or any of its Subsidiaries.

(i) if to the Company, to it at:

Fidelity & Guaranty Life

1001 Fleet Street, 6th Floor

Baltimore, MD 21202

Att: General Counsel

With a copy to:

Harbinger Group, Inc.

450 Park Ave, 30th Floor

New York New York 10022

Att: General Counsel

(ii) if to the Employee, to the Employee at his or her most recent address as shown on the books and records of the Company or Subsidiary employing the Employee.

All such notices and communications shall be deemed to have been received on the date of delivery if delivered personally or on the third business day after the mailing thereof.

(f) Amendment . This Agreement may not be amended, modified or supplemented orally, but only by a written instrument executed by the Employee and the Company.

(i) Arbitration; Waiver of Jury Trial . Any dispute, controversy or claim arising out of or pursuant to this Agreement, or any undertakings, covenants and agreements incorporated by reference into this Agreement, shall be adjudicated in accordance with Section 5 of the Plan (even though this grant is not made under the Plan).

(j) Titles and Headings . The titles and headings of the sections in this Agreement are for convenience of reference only and shall not affect the meaning or interpretation of this Agreement.

(n) Clawback . Employee acknowledges and agrees to be bound by the clawback provisions set forth in Section 20(b) of the Plan (even though this grant is not made under the Plan).

IN WITNESS WHEREOF, the Company and the Employee have executed this Agreement as of the date first above written.

FIDELITY & GUARANTY LIFE

By:

Name: Lee Launer

Title: President & CEO

THE EMPLOYEE:

[[FIRSTNAME]] [[LASTNAME]]



Total Number of Shares of Unrestricted Stock (Common Stock) Granted Pursuant to this Agreement:	[[SHARESGRANTED]]

Exhibit 31.1

CERTIFICATION OF CEO PURSUANT TO RULE 13a-14(a) or 15d-14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Leland Launer, Jr., certify that:


1.	I have reviewed this quarterly report Form 10-Q for the quarterly period ended December 31, 2013 of Fidelity & Guaranty Life;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	[Paragraph omitted in accordance with Exchange Act Rule 13a-14(a)];


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 7, 2014



/s/ LELAND LAUNER, JR.
Leland Launer, Jr.
President and Chief Executive Officer

Exhibit 31.2

CERTIFICATION OF CFO PURSUANT TO RULE 13a-14(a) or 15d-14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Wendy JB Young, certify that:


1.	I have reviewed this quarterly report on Form 10-Q for the quarterly period ended December 31, 2013 of Fidelity & Guaranty Life;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	[Paragraph omitted in accordance with Exchange Act Rule 13a-14(a)];


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 7, 2014



/s/ WENDY JB YOUNG
Wendy JB Young
Senior Vice President and Chief Financial Officer

Exhibit 32.1

CERTIFICATION OF CEO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Fidelity & Guaranty Life (the “Company”) on Form 10-Q for the quarter ended December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Leland Launer, Jr., hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 to the best of my knowledge, that:


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



/s/ LELAND LAUNER, JR.
Leland Launer, Jr.
President and Chief Executive Officer

February 7, 2014

This Certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Exhibit 32.2

CERTIFICATION OF CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Fidelity & Guaranty Life (the “Company”) on Form 10-Q for the quarter ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Wendy JB Young, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 to the best of my knowledge, that:


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



/s/ WENDY JB YOUNG
Wendy JB Young
Senior Vice President and Chief Financial Officer

February 7, 2014